A BILL TO BE ENTITLED
A BILL TO BE ENTITLED
AN ACT
relating to a nonsubstantive revision of statutes relating to the Texas Department of Insurance, the business of insurance, and certain related businesses, including conforming amendments, repeals, and penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION . TITLE 6, INSURANCE CODE. The Insurance Code is amended by adding Title 6 to read as follows:
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO
INSURERS AND RELATED ENTITIES
CHAPTER 801. CERTIFICATE OF AUTHORITY
CHAPTER 802. ANNUAL STATEMENT
CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS, AND
OFFICES OUTSIDE OF THIS STATE
CHAPTER 804. SERVICE OF PROCESS
CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED
PERSONS
[Chapters 806-820 reserved for expansion]
SUBTITLE B. ORGANIZATION OF REGULATED ENTITIES
CHAPTER 821. GENERAL PROVISIONS
CHAPTER 822. GENERAL INCORPORATION AND REGULATORY REQUIREMENTS
FOR INSURANCE COMPANIES OTHER THAN LIFE, HEALTH,
OR ACCIDENT INSURANCE COMPANIES
CHAPTER 823. INSURANCE HOLDING COMPANY SYSTEMS
CHAPTER 824. MERGER AND CONSOLIDATION OF INSURANCE
CORPORATIONS
CHAPTER 825. CONVERSION OF STOCK INSURANCE COMPANY TO MUTUAL
INSURANCE COMPANY
CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY TO
STOCK INSURANCE COMPANY
CHAPTER 827. WITHDRAWAL AND RESTRICTION PLANS
CHAPTER 828. PURCHASE OF STOCK FOR TOTAL ASSUMPTION
REINSURANCE
[Chapters 829-840 reserved for expansion]
SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS
AND RELATED ENTITIES
CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES
CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS
CHAPTER 843. HEALTH MAINTENANCE ORGANIZATIONS
CHAPTER 844. CERTIFICATION OF CERTAIN NONPROFIT
HEALTH CORPORATIONS
CHAPTER 845. STATEWIDE RURAL HEALTH CARE SYSTEM
CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
[Chapters 847-860 reserved for expansion]
SUBTITLE D. CASUALTY COMPANIES
CHAPTER 861. GENERAL CASUALTY COMPANIES
CHAPTER 862. FIRE AND MARINE INSURANCE COMPANIES
[Chapters 863-880 reserved for expansion]
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES
AND RELATED ENTITIES
CHAPTER 881. STATEWIDE MUTUAL ASSESSMENT COMPANIES
CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES
CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL
LIFE INSURANCE COMPANIES
CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES
CHAPTER 885. FRATERNAL BENEFIT SOCIETIES
CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS
CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN
MUTUAL ASSESSMENT COMPANIES
CHAPTER 888. BURIAL ASSOCIATIONS
[Chapters 889-910 reserved for expansion]
SUBTITLE F. FARM AND COUNTY MUTUAL INSURANCE COMPANIES
CHAPTER 911. FARM MUTUAL INSURANCE COMPANIES
CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES
[Chapters 913-940 reserved for expansion]
SUBTITLE G. LLOYD'S PLAN AND RECIPROCAL AND
INTERINSURANCE EXCHANGES
CHAPTER 941. LLOYD'S PLAN
CHAPTER 942. RECIPROCAL AND INTERINSURANCE EXCHANGES
[Chapters 943-960 reserved for expansion]
SUBTITLE H. OTHER ENTITIES
CHAPTER 961. NONPROFIT LEGAL SERVICES CORPORATIONS
[Chapters 962-980 reserved for expansion]
SUBTITLE I. COMPANIES THAT ARE NOT ORGANIZED IN TEXAS
CHAPTER 981. SURPLUS LINES INSURANCE
CHAPTER 982. FOREIGN AND ALIEN INSURANCE COMPANIES
CHAPTER 983. REDOMESTICATION OF INSURERS AND HEALTH
MAINTENANCE ORGANIZATIONS
CHAPTER 984. MEXICAN CASUALTY INSURANCE COMPANIES
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO INSURERS AND
RELATED ENTITIES
CHAPTER 801. CERTIFICATE OF AUTHORITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 801.001. DEFINITIONS
Sec. 801.002. EXEMPTION FOR CERTAIN FRATERNAL BENEFIT
SOCIETIES
[Sections 801.003-801.050 reserved for expansion]
SUBCHAPTER B. CERTIFICATE OF AUTHORITY
Sec. 801.051. ISSUANCE OF CERTIFICATE; ELIGIBILITY
Sec. 801.052. EFFECT AND CONTENTS OF CERTIFICATE
Sec. 801.053. DURATION OF CERTIFICATE
Sec. 801.054. PREFERENCE FOR DOMESTIC COMPANY
Sec. 801.055. DEPOSIT OF FEES
Sec. 801.056. FAILURE TO PROVIDE COMPLETE SET OF
FINGERPRINTS: GROUND FOR DENIAL OF
APPLICATION
Sec. 801.057. FAILURE TO FILE ANNUAL STATEMENT: GROUND
FOR REVOCATION OR SUSPENSION
[Sections 801.058-801.100 reserved for expansion]
SUBCHAPTER C. COMPETENCE, FITNESS, OR REPUTATION
Sec. 801.101. DEPARTMENT INQUIRY
Sec. 801.102. DENIAL OF APPLICATION OR REVOCATION OF
CERTIFICATE
[Sections 801.103-801.150 reserved for expansion]
SUBCHAPTER D. FELONY CONVICTION
Sec. 801.151. ISSUANCE OF CERTIFICATE PROHIBITED
Sec. 801.152. REVOCATION OF CERTIFICATE
Sec. 801.153. PETITION FOR ISSUANCE OR REINSTATEMENT
OF CERTIFICATE
Sec. 801.154. GRANT OF PETITION
Sec. 801.155. RULES RELATING TO CONTENTS OF PETITION
CHAPTER 801. CERTIFICATE OF AUTHORITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 801.001. DEFINITIONS. In this chapter:
(1) "Control" has the meaning described by Section 823.005.
(2) "Insurer" means the issuer of an insurance policy that is issued to another in consideration of a premium and that insures against a loss that may be insured against under the law. The term includes a:
(A) fraternal benefit society;
(B) Lloyd's plan;
(C) mutual company of any kind, including a:
(i) statewide mutual assessment association;
(ii) local mutual aid association or burial association; and
(iii) county or farm mutual insurance company;
(D) reciprocal or interinsurance exchange; and
(E) stock company.
(3) "Person" has the meaning assigned by Section 823.002. (V.T.I.C. Art. 1.14, Secs. 2 (part), 3 (part).)
Sec. 801.002. EXEMPTION FOR CERTAIN FRATERNAL BENEFIT SOCIETIES. This chapter does not apply to a fraternal benefit society that:
(1) sells insurance policies only as an incidental benefit to its members; and
(2) on September 6, 1955, was:
(A) organized and licensed by the department as a fraternal benefit society; or
(B) exempt under former Article 10.12 or 10.38, revised as Section 885.004. (V.T.I.C. Art. 1.14, Sec. 3 (part).)
[Sections 801.003-801.050 reserved for expansion]
SUBCHAPTER B. CERTIFICATE OF AUTHORITY
Sec. 801.051. ISSUANCE OF CERTIFICATE; ELIGIBILITY. The department shall issue under the department's seal a certificate of authority to act as an insurer to an applicant applying for the certificate if the department determines that the applicant has complied with the law. (V.T.I.C. Art. 1.14, Sec. 1 (part).)
Sec. 801.052. EFFECT AND CONTENTS OF CERTIFICATE. A certificate of authority issued to an insurer under this chapter authorizes the insurer to engage in the business of insurance. The certificate of authority must state the specific kinds of insurance authorized under the certificate. (V.T.I.C. Art. 1.14, Sec. 1 (part).)
Sec. 801.053. DURATION OF CERTIFICATE. A certificate of authority issued to an insurer under this chapter is effective until it is suspended or revoked. (V.T.I.C. Art. 1.14, Sec. 1 (part).)
Sec. 801.054. PREFERENCE FOR DOMESTIC COMPANY. In issuing a certificate of authority to an applicant under this chapter, the department shall give preference to an application submitted by a domestic company. (V.T.I.C. Art. 1.14, Sec. 2 (part).)
Sec. 801.055. DEPOSIT OF FEES. A fee collected by the department under this chapter for a certificate of authority shall be deposited to the credit of the Texas Department of Insurance operating account. (V.T.I.C. Art. 1.14, Sec. 1A.)
Sec. 801.056. FAILURE TO PROVIDE COMPLETE SET OF FINGERPRINTS: GROUND FOR DENIAL OF APPLICATION. (a) In this section, "authorization" means any authorization issued by the department to engage in an activity regulated under this code, including:
(1) a certificate of authority;
(2) a certificate of registration;
(3) a license; and
(4) a permit.
(b) The department may deny an application for an authorization if the applicant or a corporate officer of the applicant fails to provide a complete set of fingerprints on request by the department. (V.T.I.C. Art. 1.10C, Subsec. (e) (part).)
Sec. 801.057. FAILURE TO FILE ANNUAL STATEMENT: GROUND FOR REVOCATION OR SUSPENSION. A certificate of authority of an insurer that fails to file an annual statement required by law is subject to being suspended or revoked by the department. (V.T.I.C. Art. 1.14, Sec. 1 (part).)
[Sections 801.058-801.100 reserved for expansion]
SUBCHAPTER C. COMPETENCE, FITNESS, OR REPUTATION
Sec. 801.101. DEPARTMENT INQUIRY. The department may inquire into the competence, fitness, or reputation of:
(1) an officer or director of an insurer; or
(2) a person having control of an insurer. (V.T.I.C. Art. 1.14, Sec. 3 (part).)
Sec. 801.102. DENIAL OF APPLICATION OR REVOCATION OF CERTIFICATE. If after conducting an inquiry under Section 801.101 the department determines that, based on substantial evidence, the person who is the subject of the inquiry is not worthy of the public confidence, the department shall, after written notice and hearing:
(1) deny the application for a certificate of authority; or
(2) revoke the insurer's certificate of authority. (V.T.I.C. Art. 1.14, Sec. 3 (part).)
[Sections 801.103-801.150 reserved for expansion]
SUBCHAPTER D. FELONY CONVICTION
Sec. 801.151. ISSUANCE OF CERTIFICATE PROHIBITED. Except as provided by Sections 801.153 and 801.154, the department may not issue a certificate of authority to an applicant if a corporate officer or member of the board of directors of the applicant has been convicted of a felony involving:
(1) moral turpitude; or
(2) breach of a fiduciary duty. (V.T.I.C. Art. 1.14A, Subsec. (a).)
Sec. 801.152. REVOCATION OF CERTIFICATE. After notice and hearing, the department may revoke the certificate of authority of an insurer if a corporate officer or member of the board of directors of the insurer is convicted of a felony involving:
(1) moral turpitude; or
(2) breach of a fiduciary duty. (V.T.I.C. Art. 1.14A, Subsec. (b).)
Sec. 801.153. PETITION FOR ISSUANCE OR REINSTATEMENT OF CERTIFICATE. A company may petition the commissioner for issuance or reinstatement of a certificate of authority of the company that is denied or revoked under this subchapter:
(1) not earlier than the later of:
(A) the fifth anniversary of the date of the final conviction; or
(B) if the officer or director is sentenced to confinement or imprisonment or placed on community supervision, the fifth anniversary of the date the officer or director completes the sentence or period of community supervision; or
(2) after the officer or director ceases to be an officer or director of the insurer. (V.T.I.C. Art. 1.14A, Subsecs. (c), (d) (part), (e).)
Sec. 801.154. GRANT OF PETITION. The commissioner shall grant a petition for issuance or reinstatement of a certificate of authority under this subchapter if the petitioner demonstrates that granting the petition would be in the public interest and that justice would best be served by granting the petition. (V.T.I.C. Art. 1.14A, Subsec. (f).)
Sec. 801.155. RULES RELATING TO CONTENTS OF PETITION. The department may adopt rules under this subchapter prescribing the contents of a petition for issuance or reinstatement of a certificate of authority. (V.T.I.C. Art. 1.14A, Subsec. (d) (part).)
CHAPTER 802. ANNUAL STATEMENT
SUBCHAPTER A. ANNUAL STATEMENT OF INSURANCE COMPANIES
Sec. 802.001. FORM OF ANNUAL STATEMENT
Sec. 802.002. ACTUARIAL OPINION REQUIRED
Sec. 802.003. FILING DATE OF ANNUAL STATEMENT
DELIVERED BY POSTAL SERVICE
[Sections 802.004-802.050 reserved for expansion]
SUBCHAPTER B. FILING WITH NATIONAL ASSOCIATION OF
INSURANCE COMMISSIONERS
Sec. 802.051. APPLICABILITY OF SUBCHAPTER
Sec. 802.052. CONCURRENT FILING WITH NATIONAL ASSOCIATION
OF INSURANCE COMMISSIONERS
Sec. 802.053. EXEMPTION AUTHORITY
Sec. 802.054. COMPLIANCE
Sec. 802.055. COSTS
Sec. 802.056. STATUS OF REPORTS AND OTHER INFORMATION
CHAPTER 802. ANNUAL STATEMENT
SUBCHAPTER A. ANNUAL STATEMENT OF INSURANCE COMPANIES
Sec. 802.001. FORM OF ANNUAL STATEMENT. (a) The commissioner, as necessary to obtain an accurate indication of the company's condition and method of transacting business, may change the form of any annual statement required to be filed by any kind of insurance company.
(b) The form may require only information that relates to the business of the insurance company. (V.T.I.C. Art. 1.11, Subsec. (a) (part).)
Sec. 802.002. ACTUARIAL OPINION REQUIRED. (a) In this section, "qualified actuary" means:
(1) a member in good standing of the American Academy of Actuaries; or
(2) a person who has otherwise demonstrated actuarial competence to the satisfaction of the commissioner or an insurance regulatory official of another state in which the insurance company is domiciled.
(b) An insurance company's annual statement must include a statement of a qualified actuary entitled "Statement of Actuarial Opinion" that:
(1) is located on or is attached to the first page of the annual statement; and
(2) provides the opinion of the actuary relating to policy reserves and other actuarial items for life insurance, accident and health insurance, and annuities, or loss and loss adjustment expense reserves for property and casualty risks, as described in the annual statement instructions of the National Association of Insurance Commissioners as appropriate for the type of risks insured. (V.T.I.C. Art. 1.11, Subsecs. (c), (d).)
Sec. 802.003. FILING DATE OF ANNUAL STATEMENT DELIVERED BY POSTAL SERVICE. Except as otherwise specifically provided, for an annual statement that is required to be filed in the offices of the commissioner and that is delivered by the United States Postal Service to the offices of the commissioner after the date on which the annual statement is required to be filed, the date of filing is:
(1) the date of the postal service postmark stamped on the cover in which the document is mailed; or
(2) any other evidence of mailing authorized by the postal service reflected on the cover in which the document is mailed. (V.T.I.C. Art. 1.11(a) (part).)
[Sections 802.004-802.050 reserved for expansion]
SUBCHAPTER B. FILING WITH NATIONAL ASSOCIATION OF
INSURANCE COMMISSIONERS
Sec. 802.051. APPLICABILITY OF SUBCHAPTER. This subchapter applies to each company regulated by the commissioner, including:
(1) a domestic or foreign stock life, health, or accident insurance company;
(2) a domestic or foreign mutual life, health, or accident insurance company;
(3) a domestic or foreign stock fire or casualty insurance company;
(4) a domestic or foreign mutual fire or casualty insurance company;
(5) a Mexican casualty company;
(6) a domestic or foreign Lloyd's plan;
(7) a domestic or foreign reciprocal or interinsurance exchange;
(8) a domestic or foreign fraternal benefit society;
(9) a domestic or foreign title insurance company;
(10) an attorney's title insurance company;
(11) a stipulated premium insurance company;
(12) a nonprofit legal service corporation;
(13) a health maintenance organization;
(14) a statewide mutual assessment company;
(15) a local mutual aid association;
(16) a local mutual burial association;
(17) an association exempt under Section 887.102;
(18) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842;
(19) a county mutual insurance company; and
(20) a farm mutual insurance company. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
Sec. 802.052. CONCURRENT FILING WITH NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS. (a) Each domestic, foreign, or alien insurance company authorized to engage in the business of insurance in this state shall file a copy of the company's annual statement with the National Association of Insurance Commissioners at the time the company files the statement with the commissioner.
(b) The statement required by Subsection (a) must:
(1) meet requirements adopted by the commissioner, including:
(A) a change in substance or form;
(B) an additional filing; and
(C) any requirement that the statement be in a computer compatible format; and
(2) include the signed jurat page and the actuarial opinion, as required by the jurisdiction in which the insurance company is domiciled.
(c) The insurance company shall also file with the National Association of Insurance Commissioners a copy of any amendment or addition to the annual statement that is subsequently filed with the commissioner. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
Sec. 802.053. EXEMPTION AUTHORITY. The commissioner may exempt any class of insurance companies from the requirements of this subchapter if the commissioner believes the information required under this subchapter will not be useful for regulatory purposes. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
Sec. 802.054. COMPLIANCE. The commissioner may consider a foreign insurance company to be in compliance with the requirements of Section 802.052 if the company is domiciled in a state with a law substantially similar to that section. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
Sec. 802.055. COSTS. (a) An insurance company shall pay the costs of preparing and furnishing to the National Association of Insurance Commissioners the information required under Section 802.052.
(b) Except as provided by Subsection (a), costs relating to providing the information required under Section 802.052 may not be assessed against an insurance company. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
Sec. 802.056. STATUS OF REPORTS AND OTHER INFORMATION. A report or any other information resulting from the collection, review, analysis, and distribution of information developed from the filing of annual statement convention blanks and provided to the department by the National Association of Insurance Commissioners is considered part of the process of examination of insurance companies under this code, including Articles 1.15-1.19. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS,
AND OFFICES OUTSIDE OF THIS STATE
Sec. 803.001. DEFINITIONS
Sec. 803.002. APPLICABILITY OF CHAPTER
Sec. 803.003. AUTHORITY TO LOCATE OUT OF STATE
Sec. 803.004. LOCATION AT BRANCH OR AGENCY OFFICE
Sec. 803.005. CONTROL OF BOOKS, RECORDS, ACCOUNTS,
AND OFFICES
Sec. 803.006. AGENT FOR SERVICE OF PROCESS
Sec. 803.007. EXAMINATION EXPENSES
Sec. 803.008. RULES
Sec. 803.009. CONFLICTING PROVISIONS
CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS,
AND OFFICES OUTSIDE OF THIS STATE
Sec. 803.001. DEFINITIONS. In this chapter:
(1) "Domestic company" means any entity licensed, chartered, or organized under this code, including:
(A) a county mutual insurance company;
(B) a farm mutual insurance company;
(C) a fire and marine insurance company;
(D) a fraternal benefit society;
(E) a general casualty company;
(F) a group hospital service corporation;
(G) a health maintenance organization;
(H) a life, health, and accident insurance company;
(I) a Lloyd's plan;
(J) a local mutual aid association;
(K) a mutual life insurance company;
(L) a mutual insurance company other than a mutual life insurance company;
(M) a nonprofit legal services corporation;
(N) a reciprocal exchange;
(O) a statewide mutual assessment company;
(P) a stipulated premium insurance company;
(Q) a surety and trust company; and
(R) a title insurance company.
(2) "Insurance holding company system" has the meaning described by Section 823.006. (V.T.I.C. Art. 1.28, Sec. 1(a) (part), New.)
Sec. 803.002. APPLICABILITY OF CHAPTER. This chapter applies only to a domestic company that is:
(1) an affiliate of an insurance holding company system and in compliance with Chapter 823;
(2) a nonprofit legal services corporation the claims and daily affairs of which are handled under contract by a foreign insurer that holds a certificate of authority to engage in a similar business in this state; or
(3) a health maintenance organization that is affiliated with another health maintenance organization or a health care provider. (V.T.I.C. Art. 1.28, Secs. 1(a) (part), (b).)
Sec. 803.003. AUTHORITY TO LOCATE OUT OF STATE. (a) A domestic company may locate and maintain its principal offices and all or any part of its books, records, and accounts outside this state at any other location in the United States if:
(1) the company has given written notice of this intention to the commissioner, except as provided by Subsection (b);
(2) the commissioner has not disapproved the notice before the 31st day after the date on which the company gives the notice; and
(3) the company meets the requirements of this chapter.
(b) A separate notice under this section is not required if:
(1) the domestic company has an agreement to maintain its books and records outside of the state with an affiliate; and
(2) the agreement:
(A) has been approved under Chapter 823; and
(B) contains substantially all the information required for notice under this section. (V.T.I.C. Art. 1.28, Secs. 1(a) (part), (f).)
Sec. 803.004. LOCATION AT BRANCH OR AGENCY OFFICE. This chapter does not apply to the location and maintenance of the normal books, records, and accounts of a domestic company, including policyholder and claim files, relating to the business produced by or through an agency of the company at a branch or agency office located in the United States, regardless of whether the agency is an affiliate of the company as provided in Chapter 823. (V.T.I.C. Art. 1.28, Sec. 1(a) (part).)
Sec. 803.005. CONTROL OF BOOKS, RECORDS, ACCOUNTS, AND OFFICES. (a) The books, records, accounts, or offices of a domestic company must be under the company's direct supervision, management, and control.
(b) The ultimate controlling person of an insurance holding company system affiliated with a domestic company, or the immediate or intermediate controlling person of the domestic company, must be domiciled, licensed, or admitted to transact business in a jurisdiction in the United States. (V.T.I.C. Art. 1.28, Secs. 1(c), (d).)
Sec. 803.006. AGENT FOR SERVICE OF PROCESS. A domestic company that under this chapter has moved its principal offices and any part of its books, records, and accounts outside this state and the controlling person of an affiliated insurance holding company system must comply with Section 804.102. (V.T.I.C. Art. 1.28, Sec. 1(e).)
Sec. 803.007. EXAMINATION EXPENSES. A credit on or an offset against the amount of premium taxes to be paid by a domestic company to the state in a taxable year may not be allowed on:
(1) a fee or examination expense paid to another state; or
(2) an examination expense:
(A) incurred by a representative of the department that is directly attributable to an examination of the books, records, accounts, or principal offices of a domestic company located outside this state; or
(B) paid in a different taxable year. (V.T.I.C. Art. 1.28, Sec. 2(a).)
Sec. 803.008. RULES. The commissioner shall adopt rules to authorize a domestic company to maintain its books and records with a nonaffiliated entity other than an agency. (V.T.I.C. Art. 1.28, Sec. 1(g).)
Sec. 803.009. CONFLICTING PROVISIONS. This chapter prevails over a conflicting provision of any other law of this state, including Articles 1.16, 4.10, 4.11, and 9.59. (V.T.I.C. Art. 1.28, Sec. 2(b).)
CHAPTER 804. SERVICE OF PROCESS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 804.001. DEFINITION
Sec. 804.002. RULES
Sec. 804.003. FEES
[Sections 804.004-804.100 reserved for expansion]
SUBCHAPTER B. PERSONS AUTHORIZED TO RECEIVE SERVICE OF PROCESS
Sec. 804.101. DOMESTIC COMPANY
Sec. 804.102. DOMESTIC COMPANY THAT MAINTAINS PRINCIPAL
OFFICES OR BOOKS, RECORDS, AND ACCOUNTS OUT
OF STATE
Sec. 804.103. AUTHORIZED ALIEN OR FOREIGN COMPANY
Sec. 804.104. RISK RETENTION GROUP NOT CHARTERED IN THIS
STATE
Sec. 804.105. PERSON IN RECEIVERSHIP
Sec. 804.106. ELIGIBLE SURPLUS LINES INSURER; POLICY
REQUIREMENT FOR INSURER AND AGENT
Sec. 804.107. UNAUTHORIZED PERSON OR INSURER
Sec. 804.108. INSURANCE HOLDING COMPANY SYSTEM LAW
[Sections 804.109-804.200 reserved for expansion]
SUBCHAPTER C. PROCEDURES RELATING TO SERVICE OF PROCESS ON
COMMISSIONER
Sec. 804.201. PROCEDURE FOR SERVING COMMISSIONER
Sec. 804.202. EFFECT OF SERVICE ON COMMISSIONER
Sec. 804.203. MAILING PROCESS; CERTIFICATE
Sec. 804.204. RECORD
[Sections 804.205-804.300 reserved for expansion]
SUBCHAPTER D. PROCEDURES RELATING TO SERVICE OF PROCESS ON
SECRETARY OF STATE
Sec. 804.301. PROCEDURE FOR SERVING SECRETARY OF STATE
Sec. 804.302. MAILING PROCESS
Sec. 804.303. RECORD
CHAPTER 804. SERVICE OF PROCESS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 804.001. DEFINITION. In this chapter, "process" means legal process, including a demand or notice required or permitted by law. (New.)
Sec. 804.002. RULES. The commissioner may adopt rules essential for the effective implementation of this chapter. (V.T.I.C. Art. 1.36, Sec. 13.)
Sec. 804.003. FEES. A fee collected under this chapter shall be deposited to the credit of the Texas Department of Insurance operating account for use by the department. The department shall use the money for payment of salaries and other expenses arising from the:
(1) examination of insurance companies;
(2) licensure of insurance companies; and
(3) investigation of violations of the insurance laws of this state. (V.T.I.C. Art. 1.36, Sec. 3(h).)
[Sections 804.004-804.100 reserved for expansion]
SUBCHAPTER B. PERSONS AUTHORIZED TO RECEIVE SERVICE OF PROCESS
Sec. 804.101. DOMESTIC COMPANY. (a) In this section:
(1) "Domestic company" means a company that is domiciled in and authorized to engage in the business of insurance in this state.
(2) "Company" means:
(A) an insurance company, including:
(i) a casualty insurance company;
(ii) a county mutual insurance company;
(iii) an exempt association under Section 887.102;
(iv) a farm mutual insurance company;
(v) a fire insurance company;
(vi) a fraternal benefit society;
(vii) a life insurance company;
(viii) a Lloyd's plan;
(ix) a mutual assessment company;
(x) a mutual insurance company other than a mutual life insurance company;
(xi) a reciprocal exchange;
(xii) a risk retention group;
(xiii) a stipulated premium insurance company;
(xiv) a title insurance company; and
(xv) a carrier providing job protection insurance;
(B) a group hospital service corporation;
(C) a health maintenance organization;
(D) a prepaid legal services corporation; or
(E) any other company engaged in the business of insurance as a principal.
(b) A domestic company may be served with process by:
(1) serving the president, an active vice president, secretary, or attorney in fact at the home office or principal place of business of the company; or
(2) leaving a copy of the process at the home office or principal business office of the company during regular business hours. (V.T.I.C. Art. 1.36, Sec. 2(a); New.)
Sec. 804.102. DOMESTIC COMPANY THAT MAINTAINS PRINCIPAL OFFICES OR BOOKS, RECORDS, AND ACCOUNTS OUT OF STATE. (a) In this section, "domestic company" has the meaning assigned by Section 803.001.
(b) As a condition of being authorized to engage in the business of insurance in this state, a domestic company that under Chapter 803 has moved its principal offices and any part of its books, records, and accounts outside this state and the controlling person of an affiliated insurance holding company system must appoint and maintain as agent for service of process a person in this state on whom a judicial or administrative process may be served.
(c) If a domestic company does not appoint or maintain a person in this state as agent for service of process or the agent cannot with reasonable diligence be found, the commissioner may accept service of process and notify the company in the manner provided by Subchapter C. (V.T.I.C. Art. 1.36, Sec. 2(b).)
Sec. 804.103. AUTHORIZED ALIEN OR FOREIGN COMPANY. (a) In this section, "company" means:
(1) an insurance company, including a:
(A) fire, casualty, or fire and casualty insurance company;
(B) fraternal benefit society;
(C) life insurance company, including a mutual or nonprofit life insurance company;
(D) Lloyd's plan;
(E) Mexican casualty insurance company;
(F) mutual fire, mutual casualty, or mutual fire and casualty insurance company;
(G) reciprocal exchange;
(H) risk retention group; and
(I) title insurance company;
(2) a health maintenance organization; and
(3) any other insurance company, regardless of its type or category, authorized to engage in the business of insurance in this state.
(b) As a condition to being issued a certificate of authority to engage in the business of insurance in this state, an alien or foreign company must appoint a person in this state as agent for service of process on whom any process to be served on the company may be served.
(c) The commissioner is an alien or foreign company's agent on whom process may be served as provided by Subchapter C if the:
(1) company fails to appoint or maintain an agent under Subsection (b);
(2) agent appointed under Subsection (b) cannot with reasonable diligence be found; or
(3) company's certificate of authority is revoked. (V.T.I.C. Art. 1.36, Sec. 4.)
Sec. 804.104. RISK RETENTION GROUP NOT CHARTERED IN THIS STATE. A risk retention group that is not chartered but that is registered in this state under Section 4(b)(3), Article 21.54, must designate the commissioner as its agent for service of process and receipt of legal documents. (V.T.I.C. Art. 1.36, Sec. 5(a).)
Sec. 804.105. PERSON IN RECEIVERSHIP. (a) Service of process with respect to an individual, insurer, or other entity for which a court has appointed the liquidator as receiver must be made only on the receiver.
(b) If Subsection (a) applies, service on the commissioner or the secretary of state has no effect. (V.T.I.C. Art. 1.36, Sec. 6.)
Sec. 804.106. ELIGIBLE SURPLUS LINES INSURER; POLICY REQUIREMENT FOR INSURER AND AGENT. (a) Each surplus lines insurer that assumes a surplus lines risk under Chapter 981 is subject to this section.
(b) Any act of engaging in the business of insurance by an eligible surplus lines insurer:
(1) constitutes the irrevocable appointment of the secretary of state by that insurer as agent for service of process arising from the insurer's engaging in the business of insurance in this state, other than service of process for an action or proceeding by the department or state; and
(2) signifies the insurer's agreement that service under this subsection has the same effect as personal service on the insurer or the insurer's successor in interest.
(c) An appointment under Subsection (b)(1) is binding on the eligible surplus lines insurer and the insurer's successor in interest.
(d) A policy issued by an eligible surplus lines insurer or a certificate of insurance issued by the surplus lines agent must contain a provision stating the substance of this section and designating the person to whom the commissioner is to mail process. The plaintiff shall supply this address in any citation served under this section.
(e) This section is in addition to any other method provided by law for service of process on a surplus lines insurer, including the method provided by Subchapter C. (V.T.I.C. Art. 1.36, Sec. 12.)
Sec. 804.107. UNAUTHORIZED PERSON OR INSURER. (a) In this section, "personal representative" includes an executor or administrator.
(b) Any act of engaging in the business of insurance as provided by Subchapter B, Chapter 101, by an unauthorized person or insurer:
(1) constitutes the irrevocable appointment of the commissioner by that person or insurer as agent for service of process arising from the person's or insurer's engaging in the business of insurance in this state, other than service of process for an action or proceeding by the department or state;
(2) constitutes the irrevocable appointment of the secretary of state by that person or insurer as agent for service of process for an action or proceeding described by Subsection (c) and arising from the person's or insurer's engaging in the business of insurance in this state; and
(3) signifies the agreement of the person or insurer that process served under this subsection and Subsection (d) has the same effect as personal service in this state on that person or insurer or the personal representative of that person or insurer or if a corporation, the corporation's successor in interest.
(c) The process may be served on the secretary of state only in an action or proceeding brought:
(1) in court by the department or the state against an unauthorized person or insurer; or
(2) before the department by a process against the unauthorized person or insurer.
(d) Service of process on an unauthorized person or insurer may be served on a person in this state that engages, on the behalf of the unauthorized person or insurer, in an act of engaging in the business of insurance in this state as provided by Subchapter B, Chapter 101.
(e) In an action or proceeding in which process is served under Subsection (b) or (d), a plaintiff or complainant is not entitled to a default judgment or determination before the 30th day after the date on which the copy of the process is mailed to the defendant.
(f) This section does not apply to an entity that was an eligible surplus lines insurer under Chapter 981 on the date on which the applicable coverage was issued.
(g) This section does not limit or diminish the right to serve process on a person or insurer in any other manner provided by law. (V.T.I.C. Art. 1.36, Secs. 7(a), (b), (c), (d), 8(a), (b), (c), (f), 10.)
Sec. 804.108. INSURANCE HOLDING COMPANY SYSTEM LAW. A person, as that term is defined by Section 823.002, that violates Chapter 823 is considered to have appointed the commissioner as agent for service of process on the person for an action or proceeding arising from a violation of that chapter. (V.T.I.C. Art. 1.36, Sec. 7(e) (part).)
[Sections 804.109-804.200 reserved for expansion]
SUBCHAPTER C. PROCEDURES RELATING TO SERVICE OF PROCESS ON
COMMISSIONER
Sec. 804.201. PROCEDURE FOR SERVING COMMISSIONER. (a) Process served by serving the commissioner under this chapter must be directed to the defendant and include:
(1) for an unauthorized person or insurer, the name and address of the person or insurer to be served;
(2) for a risk retention group, the name and address of the group to be served;
(3) for a surplus lines insurer, the name and address of the insurer to be served;
(4) for an unincorporated association, trust, or other organization formed under Article 3.71, the name and address of the association, trust, or organization; or
(5) for an authorized company, the name and address of the company as it appears in the department records.
(b) Process may be served on the commissioner:
(1) personally by a disinterested person who is at least 18 years of age leaving two copies of the process at the office of the department during regular business hours with:
(A) the commissioner; or
(B) an appointee of the commissioner authorized to receive process; or
(2) by certified or registered mail.
(c) A fee not to exceed $50, payable by check or money order to the department, must accompany each process served on the commissioner. (V.T.I.C. Art. 1.36, Secs. 3(a), (b), (c).)
Sec. 804.202. EFFECT OF SERVICE ON COMMISSIONER. Service on the commissioner acting as agent for service of process is service on the principal. (V.T.I.C. Art. 1.36, Sec. 3(g).)
Sec. 804.203. MAILING PROCESS; CERTIFICATE. (a) The commissioner shall immediately send by registered or certified mail, return receipt requested, one copy of process served on the commissioner under Section 804.201 to:
(1) the defendant at the address supplied in the process as provided by Sections 804.201(a)(1) through (4); or
(2) if Section 804.201(a)(5) applies, the home office or principal business office of the authorized company, as indicated in the department records.
(b) The commissioner shall send by registered or certified mail, return receipt requested, copies of process served under Section 804.108 to the last known address of the person.
(c) On receiving the return receipt for certified or registered mail, the commissioner shall issue a certificate showing the service and proof of delivery by a return receipt to the plaintiff and clerk of the court or agency where the proceeding is pending.
(d) The commissioner shall provide on request the certificate described by Subsection (c). The commissioner may charge a fee not to exceed $10 for the certificate. (V.T.I.C. Art. 1.36, Secs. 3(d), (f), 7(e) (part).)
Sec. 804.204. RECORD. The commissioner shall keep a record of:
(1) each process served on the commissioner under this chapter; and
(2) the action taken by the commissioner regarding the process. (V.T.I.C. Art. 1.36, Sec. 3(e).)
[Sections 804.205-804.300 reserved for expansion]
SUBCHAPTER D. PROCEDURES RELATING TO SERVICE OF PROCESS ON
SECRETARY OF STATE
Sec. 804.301. PROCEDURE FOR SERVING SECRETARY OF STATE. Process served by serving the secretary of state under Section 804.107 must be served by leaving two copies of the process at the office of the secretary of state during regular business hours with:
(1) the secretary of state; or
(2) an appointee of the secretary of state authorized to receive service. (V.T.I.C. Art. 1.36, Sec. 8(d).)
Sec. 804.302. MAILING PROCESS. The secretary of state shall mail one copy of process in the proceeding served on the secretary of state under Section 804.301 to the defendant in a court proceeding or to whom the process in an administrative proceeding is addressed or directed, at the person's or entity's last known home office or principal place of business. (V.T.I.C. Art. 1.36, Sec. 8(e) (part).)
Sec. 804.303. RECORD. The secretary of state shall keep a record of each process served on the secretary of state. (V.T.I.C. Art. 1.36, Sec. 8(e) (part).)
CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED
PERSONS
SUBCHAPTER A. ACTIVITIES OF DIRECTORS,
OFFICERS, AND SHAREHOLDERS
Sec. 805.001. DEFINITIONS
Sec. 805.002. APPLICABILITY OF SUBCHAPTER
Sec. 805.003. PROHIBITED ACTIVITIES
Sec. 805.004. ACTIVITIES NOT PROHIBITED
[Sections 805.005-805.020 reserved for expansion]
SUBCHAPTER B. CERTAIN PAYMENTS BY DIRECTORS, OFFICERS, AND
TRUSTEES
Sec. 805.021. LIABILITY FOR FEE AND TAX PAYMENTS
CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED
PERSONS
SUBCHAPTER A. ACTIVITIES OF DIRECTORS,
OFFICERS, AND SHAREHOLDERS
Sec. 805.001. DEFINITIONS. In this subchapter:
(1) "Major shareholder" means an individual, corporation, partnership, association, joint-stock company, business trust, or unincorporated organization that is directly or indirectly the beneficial owner of more than 10 percent of any class of an equity security of an insurer.
(2) "Subsidiary" means a corporation:
(A) of which at least 50 percent of any class of an equity security is owned by an insurer; or
(B) that is managed, directly or indirectly controlled, or subject to control by an insurer. (V.T.I.C. Art. 1.29, Secs. 1(a) (part), (b) (part).)
Sec. 805.002. APPLICABILITY OF SUBCHAPTER. (a) This subchapter applies to any insurer, including a:
(1) capital stock company;
(2) reciprocal or interinsurance exchange;
(3) Lloyd's plan;
(4) fraternal benefit society;
(5) mutual company, including a mutual assessment company;
(6) local mutual aid association;
(7) burial association;
(8) county mutual insurance company;
(9) farm mutual insurance company;
(10) fidelity, guaranty, or surety company;
(11) mutual life insurance company;
(12) mutual insurance company other than a mutual life insurance company;
(13) stipulated premium company;
(14) title insurance company; and
(15) any other insurance company engaged in the business of insurance in or organized under the laws of this state or otherwise regulated under this code.
(b) A provision of this code limiting regulation under this code does not limit the application of this subchapter.
(c) This subchapter controls if there is ambiguity or a conflict between this subchapter and another provision of this code. (V.T.I.C. Art. 1.29, Secs. 1(b) (part), 2.)
Sec. 805.003. PROHIBITED ACTIVITIES. (a) A director, officer, or major shareholder of an insurer may not:
(1) except as provided by this subchapter, directly, indirectly, or through a substantial interest in another corporation, firm, or business unit receive money or another thing of value for negotiating, procuring, recommending, or aiding in a purchase, sale, or exchange of property or a loan from the insurer or its subsidiary;
(2) directly, indirectly, or through a substantial interest in another corporation, firm, or business unit have a pecuniary interest in a purchase, sale, exchange, or loan described by Subdivision (1) as a principal, co-principal, agent, or beneficiary; or
(3) directly or indirectly accept a loan or guarantee described by Subsection (b).
(b) An insurer may not directly, indirectly, or through its subsidiary make a loan to or guarantee the financial obligation of a director, officer, or major shareholder of an insurer. (V.T.I.C. Art. 1.29, Sec. 1(a) (part).)
Sec. 805.004. ACTIVITIES NOT PROHIBITED. This subchapter does not prohibit:
(1) a director, officer, or major shareholder of an insurer from:
(A) becoming a policyholder of the insurer and exercising the usual rights of a policyholder;
(B) participating as beneficiary in a pension plan, deferred compensation plan, profit-sharing or bonus plan, stock option plan, or similar plan adopted by the insurer and for which the director, officer, or major shareholder may be eligible under the terms of the plan;
(C) receiving a salary, bonus, or other remuneration for a service rendered to the insurer as an employee of the insurer and not in violation of another provision of this code; or
(D) entering into an arms-length transaction with the insurer if:
(i) the transaction is not prohibited by another statute; and
(ii) the commissioner approves the transaction before the transaction is made;
(2) a director of an insurer from:
(A) performing professional services not required of a director by law; or
(B) receiving director's fees or reimbursement for an expense incurred in the performance of a duty as a director;
(3) a transaction within an insurance holding company system by an insurer with its holding company, subsidiary, or affiliate that:
(A) is not prohibited by law;
(B) meets the test of being fair and proper; and
(C) is regulated by another statute;
(4) a transaction or arrangement that:
(A) is not prohibited by law; and
(B) meets the test of being fair and proper as prescribed by rules adopted by the commissioner; or
(5) the approval and payment of lawful dividends to policyholders and shareholders. (V.T.I.C. Art. 1.29, Sec. 1(c).)
[Sections 805.005-805.020 reserved for expansion]
SUBCHAPTER B. CERTAIN PAYMENTS BY DIRECTORS, OFFICERS, AND
TRUSTEES
Sec. 805.021. LIABILITY FOR FEE AND TAX PAYMENTS. (a) In this section, "fee or tax" includes a license, excise, privilege, premium, or occupation fee or tax.
(b) A director, officer, or trustee of an insurer is not personally liable, in complying with the law, for the payment of or for the determination not to contest the payment of a fee or tax to a state or a political subdivision of a state that the board of directors or trustees considers to be in the corporate interest of the insurer.
(c) Subsection (b) does not apply if, before the payment of the fee or tax, the state court of final appellate jurisdiction or the United States Supreme Court expressly holds that the law imposing the fee or tax is invalid.
(d) This section does not directly or indirectly limit, minimize, or interpret the rights and powers of an insurer or the directors, officers, or trustees of an insurer. (V.T.I.C. Art. 21.37.)
[Chapters 806-820 reserved for expansion]
SUBTITLE B. ORGANIZATION OF REGULATED ENTITIES
CHAPTER 821. GENERAL PROVISIONS
SUBCHAPTER A. MINIMUM INSURANCE TO BE MAINTAINED BY INSURER
Sec. 821.001. APPLICABILITY OF SUBCHAPTER
Sec. 821.002. EXEMPTIONS
Sec. 821.003. MINIMUM REQUIREMENTS
Sec. 821.004. REPORT TO ATTORNEY GENERAL; SUIT AGAINST INSURER
[Sections 821.005-821.050 reserved for expansion]
SUBCHAPTER B. ASSOCIATION OF INSURANCE COMPANIES
Sec. 821.051. PAYMENT OF TAXES AND FEES; COMPLIANCE WITH LAW
CHAPTER 821. GENERAL PROVISIONS
SUBCHAPTER A. MINIMUM INSURANCE TO BE MAINTAINED BY INSURER
Sec. 821.001. APPLICABILITY OF SUBCHAPTER. (a) This subchapter applies to any insurer that is required by law to hold a certificate of authority issued by the department, including:
(1) a domestic insurance company;
(2) a mutual life insurance company;
(3) a statewide mutual assessment company;
(4) a mutual insurance company other than a life insurance company operating under Chapter 883;
(5) a Lloyd's plan;
(6) a reciprocal or interinsurance exchange; and
(7) a title insurance company.
(b) This subchapter does not apply to:
(1) an insurer before the second anniversary of the date the insurer's original certificate of authority is issued; or
(2) an insurer that was paid more than $50,000 in gross premium income by policyholders during the preceding accounting year of the insurer. (V.T.I.C. Art. 21.45, Sec. 1 (part).)
Sec. 821.002. EXEMPTIONS. This subchapter does not apply to:
(1) a fraternal benefit society operating under Chapter 885;
(2) a local mutual aid association or local mutual burial association operating under Chapters 886, 887, and 888;
(3) a statewide mutual assessment company or association operating under Chapters 881, 887, or 888;
(4) another association operating under Subchapter C, Chapter 887;
(5) a farm mutual insurance company operating under Chapter 911; or
(6) a county mutual fire insurance company operating under Chapter 912. (V.T.I.C. Art. 21.45, Sec. 3.)
Sec. 821.003. MINIMUM REQUIREMENTS. An insurer must maintain at all times not less than 100 policyholders or certificate holders nor less than $200,000 of insurance that the insurer has written or acquired through reinsurance contracts. (V.T.I.C. Art. 21.45, Sec. 1 (part).)
Sec. 821.004. REPORT TO ATTORNEY GENERAL; SUIT AGAINST INSURER. (a) The department shall report to the attorney general an insurer's failure to comply with this subchapter.
(b) On receiving a report under Subsection (a), the attorney general shall bring suit in a district court in Travis County against the insurer to cancel, forfeit, and revoke the insurer's:
(1) charter, articles of association, or articles of agreement; and
(2) certificate of authority. (V.T.I.C. Art. 21.45, Sec. 2.)
[Sections 821.005-821.050 reserved for expansion]
SUBCHAPTER B. ASSOCIATION OF INSURANCE COMPANIES
Sec. 821.051. PAYMENT OF TAXES AND FEES; COMPLIANCE WITH LAW. (a) Life, health, fire, marine, or inland insurance companies that associate to issue or sell insurance policies may not engage in the business of insurance in this state until each company has:
(1) paid the company's taxes and fees that are due; and
(2) complied with all requirements of law.
(b) The commissioner may not authorize to engage in the business of insurance in this state an insurance company that does not comply with Subsection (a). (V.T.I.C. Art. 21.34.)
CHAPTER 822. GENERAL INCORPORATION AND REGULATORY
REQUIREMENTS FOR INSURANCE COMPANIES OTHER THAN
LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 822.001. APPLICABILITY OF CHAPTER
Sec. 822.002. APPLICABILITY OF LAW GOVERNING
CORPORATIONS
Sec. 822.003. EFFECT ON TRANSACTIONS BETWEEN INSURANCE
COMPANIES AND OTHERS
[Sections 822.004-822.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF COMPANY
Sec. 822.051. FORMATION OF COMPANY
Sec. 822.052. ARTICLES OF INCORPORATION
Sec. 822.053. COMPANY'S NAME
Sec. 822.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS
Sec. 822.055. SHARES OF STOCK WITH PAR VALUE
Sec. 822.056. SHARES OF STOCK WITHOUT PAR VALUE
Sec. 822.057. APPLICATION FOR CHARTER
Sec. 822.058. ACTION BY COMMISSIONER AFTER FILING OF
APPLICATION FOR CHARTER
Sec. 822.059. ACTION ON APPLICATION FOR CHARTER
Sec. 822.060. ACTION ON APPLICATION
Sec. 822.061. ISSUANCE OF CHARTER
[Sections 822.062-822.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 822.101. CERTIFICATE OF AUTHORITY
[Sections 822.102-822.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF COMPANY
Sec. 822.151. CONDUCTING SHAREHOLDERS MEETING
Sec. 822.152. BOARD OF DIRECTORS
Sec. 822.153. ELECTION OF DIRECTORS
Sec. 822.154. OFFICERS
Sec. 822.155. APPLICATION FOR AMENDMENT OF CHARTER
Sec. 822.156. CERTIFICATE REQUIRED FOR AMENDMENT OF
CHARTER TO AUTHORIZE SHARES WITHOUT PAR VALUE
Sec. 822.157. ACTION BY COMMISSIONER AFTER FILING OF
APPLICATION FOR CHARTER AMENDMENT
Sec. 822.158. DETERMINATION ON APPLICATION FOR CHARTER
AMENDMENT
[Sections 822.159-822.200 reserved for expansion]
SUBCHAPTER E. CAPITAL, SURPLUS, AND GUARANTY FUND
REQUIREMENTS
Sec. 822.201. APPLICABILITY OF CAPITAL AND SURPLUS REQUIREMENTS
Sec. 822.202. FULL COVERAGE AUTOMOBILE INSURANCE; DETERMINATION
OF AMOUNTS
Sec. 822.203. CAPITAL REQUIRED GENERALLY
Sec. 822.204. FORM OF CAPITAL AND SURPLUS
Sec. 822.205. UNENCUMBERED SURPLUS OR GUARANTY FUND
REQUIREMENTS FOR CERTAIN INSURANCE COMPANIES
Sec. 822.206. REPURCHASE OF CAPITAL STOCK BY TENDER OFFER
OR PRIVATE TRANSACTION
Sec. 822.207. REPURCHASE OF CAPITAL STOCK ON OPEN MARKET
Sec. 822.208. APPLICATION FOR REPURCHASE OF COMPANY'S
SHARES SUBJECT TO OTHER LAW
Sec. 822.209. REINVESTMENT OF CAPITAL STOCK
Sec. 822.210. COMMISSIONER MAY REQUIRE LARGER CAPITAL
AND SURPLUS AMOUNTS
Sec. 822.211. ACTION OF COMMISSIONER WHEN CAPITAL OR SURPLUS
REQUIREMENTS NOT SATISFIED
Sec. 822.212. INCREASE OF CAPITAL AND SURPLUS
CHAPTER 822. GENERAL INCORPORATION AND REGULATORY
REQUIREMENTS FOR INSURANCE COMPANIES OTHER THAN
LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 822.001. APPLICABILITY OF CHAPTER. Except as otherwise provided by this code, this chapter applies to the formation of each company or organization that proposes to engage in any kind of insurance business other than a life, health, or accident insurance company organized or operating under Chapter 841, 881, 882, 884, 885, 886, 887, or 888. (V.T.I.C. Art. 2.01, Subsec. (a); Art. 2.18 (part).)
Sec. 822.002. APPLICABILITY OF LAW GOVERNING CORPORATIONS. An insurance company incorporated in this state is subject to the Texas Business Corporation Act, the Texas Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes), and any other law of this state that governs corporations in general to the extent those laws are not inconsistent with this code. (V.T.I.C. Art. 2.18 (part).)
Sec. 822.003. EFFECT ON TRANSACTIONS BETWEEN INSURANCE COMPANIES AND OTHERS. The following sections do not restrict or modify any provision of this code relating to a transaction between an insurance company and the insurance company's affiliates, or between an insurance company and certain shareholders, directors, or officers of the insurance company, as provided by Subchapter A, Chapter 805, and Chapter 823:
(1) Sections 822.055 and 822.056;
(2) Section 822.057(a)(4);
(3) Section 822.061;
(4) Section 822.156;
(5) Sections 822.158(d) and (e); and
(6) Sections 822.206 and 822.207. (V.T.I.C. Art. 2.07, Sec. 7(c).)
[Sections 822.004-822.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF COMPANY
Sec. 822.051. FORMATION OF COMPANY. (a) Any number of persons may form a company for the purpose of engaging in the business of insurance.
(b) To form a company, each incorporator must adopt and sign the articles of incorporation of the company as provided by this code. (V.T.I.C. Art. 2.01, Subsec. (b) (part).)
Sec. 822.052. ARTICLES OF INCORPORATION. Articles of incorporation of a proposed insurance company must state:
(1) the name of the company;
(2) the location of the company's principal business office;
(3) the kind of insurance business the company will transact;
(4) the amount of the company's capital stock; and
(5) the amount of the company's surplus. (V.T.I.C. Art. 2.02, Subsec. (a) (part).)
Sec. 822.053. COMPANY'S NAME. An insurance company's name may not be so similar to the name of another insurance company as to likely mislead the public. (V.T.I.C. Art. 2.02, Subsec. (a) (part).)
Sec. 822.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) An insurance company must have capital stock in an amount of at least $1 million and surplus in an amount of at least $1 million.
(b) At the time of incorporation, the required capital and surplus must be in cash. (V.T.I.C. Art. 2.02, Subsecs. (a) (part), (d).)
Sec. 822.055. SHARES OF STOCK WITH PAR VALUE. (a) An insurance company organized under the laws of this state may authorize the issuance of shares of stock with a par value of not less than $1 or more than $100. The company may increase from time to time the number of shares with a par value by an amendment to the company's charter.
(b) Each par value share of stock must be fully paid before issuance in an amount that is not less than the share's par value. Par value shares issued under this section are not subject to additional call or assessment, and the subscriber or holder of those shares is not required to make an additional payment with respect to those shares.
(c) When an application for charter or an amendment to the charter authorizing the issuance of shares of stock with a par value is filed, the insurance company shall file with the department a statement under oath stating:
(1) the total number of par value shares subscribed; and
(2) the actual total consideration the company received for those shares.
(d) The shareholders of an insurance company authorizing par value shares of stock must in good faith subscribe and fully pay for shares representing at least 50 percent of the total par value of the authorized shares with a par value before the company:
(1) is granted a charter; or
(2) amends its charter to:
(A) authorize the issuance of par value shares; or
(B) increase or decrease from time to time the number of authorized par value shares.
(e) If all of the authorized par value shares of stock are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the insurance company shall file with the department a certificate authenticated by a majority of the directors stating the total number of shares issued and the total consideration received for those shares. The company shall file the certificate not later than the 90th day after the date of issuance of those remaining shares. The company is not required to file an amendment to its charter or take further action to effect the increase in the capital and surplus of the company.
(f) The consideration received by an insurance company for a par value share constitutes capital to the extent of its par value and the remainder, if any, constitutes surplus. (V.T.I.C. Art. 2.07, Secs. 1(a), (b), (c).)
Sec. 822.056. SHARES OF STOCK WITHOUT PAR VALUE. (a) An insurance company organized under the laws of this state, on incorporation or by an amendment to its charter, may authorize the issuance of shares of stock without par value.
(b) Each share of stock without par value must be equal in all respects.
(c) An insurance company may issue and dispose of authorized shares without par value for money or for notes, bonds, mortgages, and stock in the form authorized by law for capital stock of insurance companies. Each share of stock without par value must be fully paid before issuance. After the company receives payment for a share of stock issued under this section, the share is not subject to additional call or assessment and the subscriber or holder of the share is not required to make an additional payment with respect to the share.
(d) The shareholders of an insurance company authorizing shares of stock without par value must in good faith subscribe and pay for shares representing at least 50 percent of the authorized shares without par value before the company is granted a charter or has its charter amended to authorize the issuance of shares without par value. The total amount paid for the shares must be at least $250,000.
(e) If all of the authorized shares of stock without par value are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the insurance company shall file with the department a certificate authenticated by a majority of the directors stating the number of shares without par value issued and the consideration received for those shares. An insurance company may issue and dispose of those remaining authorized shares for money or an instrument authorized for minimum capital under Section 822.204 and Article 2.10.
(f) The insurance company shall file the certificate required by Subsection (e) not later than the 90th day after the date of issuance of those remaining shares. The portion of the consideration received for shares without par value that is designated as capital by the company's directors, or by the company's shareholders if the charter or articles of incorporation reserve the right to make that determination to the shareholders, constitutes capital and the remainder, if any, constitutes surplus. The company is not required to file an amendment to its charter or take further action to effect the increase in the capital and surplus of the company. (V.T.I.C. Art. 2.07, Secs. 2, 3, 5.)
Sec. 822.057. APPLICATION FOR CHARTER. (a) To obtain a charter for an insurance company, the incorporators must pay to the department the fees prescribed by law and file with the department:
(1) an application for charter on the form and containing the information prescribed by the commissioner;
(2) the company's proposed articles of incorporation;
(3) an affidavit made by the incorporators or officers of the company that states that:
(A) the capital and surplus is the bona fide property of the company; and
(B) the information in the articles of incorporation is true and correct; and
(4) if the application provides for the issuance of shares of stock without par value, a certificate authenticated by the incorporators stating:
(A) the number of shares without par value that are subscribed; and
(B) the actual consideration received by the company for those shares.
(b) If the commissioner is not satisfied with the affidavit filed under Subsection (a)(3), the commissioner may require that the incorporators provide at their expense additional evidence of a matter required in the affidavit before the commissioner:
(1) receives the proposed articles of incorporation or the application for charter;
(2) provides notice of a hearing on the application for charter or holds a hearing; or
(3) issues a certificate of authority to the company.
(c) The commissioner may not delay providing notice of a hearing on the application for charter for more than 10 days. (V.T.I.C. Art. 2.01, Subsec. (b) (part); Art. 2.05; Art. 2.07, Sec. 4 (part).)
Sec. 822.058. ACTION BY COMMISSIONER AFTER FILING OF APPLICATION FOR CHARTER. (a) On receipt of an application for the charter of an insurance company, the commissioner may set the date for a hearing on the application.
(b) After the items required for a charter under Sections 822.057(a)(1) and (2) are filed with the department and the proposed insurance company has complied with all legal requirements and before any hearing, the commissioner shall conduct an examination of the company to determine whether:
(1) the minimum capital stock and surplus requirements of Section 822.054 are satisfied;
(2) the capital stock and surplus is the bona fide property of the company; and
(3) the insurance company has fully complied with insurance laws.
(c) The commissioner may appoint a competent and disinterested person to conduct the examination required by this section. The examiner shall file an affidavit of the examiner's findings with the commissioner. The commissioner shall record the affidavit. (V.T.I.C. Art. 2.01, Subsec. (c) (part); Art. 2.04; Art. 2.06.)
Sec. 822.059. ACTION ON APPLICATION FOR CHARTER. (a) The date for a hearing on an application for charter may not be before the 11th or later than the 60th day after the date notice is provided under this section.
(b) The department shall publish notice to all interested parties of the place and date of a hearing in one or more daily newspapers of this state.
(c) The original report of the examination performed under Section 822.058 must be a part of the record of the proceedings of the hearing. (V.T.I.C. Art. 2.01, Subsecs. (c) (part), (d).)
Sec. 822.060. ACTION ON APPLICATION. (a) In considering the application, the commissioner, not later than the 30th day after the date on which a hearing under Section 822.057 is completed, shall determine if:
(1) the proposed capital structure of the company meets the requirements of this code;
(2) the proposed officers, directors, attorney in fact, or managing head of the company have sufficient insurance experience, ability, standing, and good record to make success of the proposed company probable; and
(3) the applicants are acting in good faith.
(b) If the commissioner determines by an affirmative finding any of the issues under Subsection (a) adversely to the applicants, the commissioner shall reject the application in writing, giving the reason for the rejection.
(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application. On approval of an application, the articles of incorporation of the company shall be filed with the department. (V.T.I.C. Art. 2.01, Subsecs. (e), (f).)
Sec. 822.061. ISSUANCE OF CHARTER. (a) On receipt of a charter fee in the amount determined under Article 4.07, the commissioner shall examine the articles of incorporation filed with the department under Section 822.060 and any certificate filed under Section 822.057(a)(4).
(b) If the commissioner approves the articles of incorporation and, if applicable, the certificate filed under Section 822.057(a)(4), the commissioner shall certify and file the approved documents with the department records and, on receipt of a fee in the amount determined under Article 4.07, the commissioner shall issue a certified copy of the charter to the incorporators.
(c) When the insurance company's charter is issued, the charter is effective and the incorporators may proceed with the organization of the company as provided by this code. (V.T.I.C. Art. 2.07, Sec. 4 (part).)
[Sections 822.062-822.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 822.101. CERTIFICATE OF AUTHORITY. When the articles of incorporation of an insurance company have been filed with the department under Section 822.060 or the company has been authorized to engage in business as provided by law, the commissioner shall issue to the company a certificate of authority to commence business as proposed in the company's articles of incorporation or application for charter if the commissioner determines that the company has fully complied with the law. (V.T.I.C. Art. 2.21.)
[Sections 822.102-822.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF COMPANY
Sec. 822.151. CONDUCTING SHAREHOLDERS MEETING. (a) Except as otherwise provided by this code, at a meeting of an insurance company's shareholders to elect the company's board of directors or to transact other company business, a quorum is any number of shareholders whose cumulative ownership in the company represents at least 51 percent of the company's stock.
(b) A shareholder may vote in person or by proxy. (V.T.I.C. Art. 2.13.)
Sec. 822.152. BOARD OF DIRECTORS. (a) An insurance company organized under the laws of this state is managed by its board of directors.
(b) The board consists of not fewer than seven directors. A director:
(1) is not required to be a shareholder unless such a qualification is required by the articles of incorporation or bylaws of the company; and
(2) serves until the director's successor is elected and accepts the position.
(c) The board of directors may adopt bylaws and regulations as necessary to conduct the company's business. A majority of the board is a quorum.
(d) The board of directors shall keep a full and correct record of the board's transactions. The shareholders or other interested persons may inspect those records during business hours.
(e) The directors shall fill a vacancy that occurs on the board or in any office of the company. (V.T.I.C. Arts. 2.11 (part), 2.12 (part), 2.15, 2.16, 2.17.)
Sec. 822.153. ELECTION OF DIRECTORS. (a) Not later than the 30th day after the date on which the company's subscription books are filed, the shareholders of an insurance company shall meet to elect the company's initial board of directors. At the meeting, each shareholder is entitled to one vote for each share of stock.
(b) The shareholders of an insurance company shall meet before May 1 of each year as provided by the company's bylaws to elect successor directors.
(c) If the shareholders do not elect directors at an annual meeting, the shareholders may elect the directors at a special shareholders meeting called for that purpose. Not later than the 30th day before the date of the special meeting, the shareholders must publish notice of the meeting in a newspaper of general circulation in the county in which the principal office of the company is located. (V.T.I.C. Arts. 2.11 (part), 2.12 (part).)
Sec. 822.154. OFFICERS. (a) An insurance company's directors shall choose one of the directors to serve as the company's president.
(b) Other officers of the insurance company shall be chosen in accordance with the company's bylaws. An officer other than the president is not required to be a director or a shareholder unless such a qualification is required by the company's bylaws or articles of incorporation.
(c) An insurance company's officers shall perform duties, receive compensation, and provide security as stated in the company's bylaws. (V.T.I.C. Arts. 2.11 (part), 2.14.)
Sec. 822.155. APPLICATION FOR AMENDMENT OF CHARTER. A domestic insurance company may amend its charter by paying to the commissioner a fee in the amount determined under Article 4.07 and by filing with the department:
(1) an application for a charter amendment on the form and containing the information prescribed by the commissioner; and
(2) the company's proposed amendment. (V.T.I.C. Art. 2.03 (part).)
Sec. 822.156. CERTIFICATE REQUIRED FOR AMENDMENT OF CHARTER TO AUTHORIZE SHARES WITHOUT PAR VALUE. (a) If a proposed amendment to the charter of an insurance company authorizes the issuance of shares of stock without par value, the insurance company must file with the department, at the time the proposed amendment is filed, a certificate authenticated by a majority of the directors stating:
(1) the number of shares without par value that are subscribed; and
(2) the consideration the company received for those shares.
(b) On receipt of the certificate, the commissioner shall examine the certificate. The commissioner shall certify and file the certificate if the commissioner approves the certificate. (V.T.I.C. Art. 2.07, Sec. 4 (part).)
Sec. 822.157. ACTION BY COMMISSIONER AFTER FILING OF APPLICATION FOR CHARTER AMENDMENT. (a) The commissioner may hold a hearing on an application for a charter amendment. If the commissioner determines to hold a hearing on the application, the commissioner, after the items required for the charter amendment are filed with the commissioner, shall set a date for the hearing and publish notice of the hearing in one or more daily newspapers of this state.
(b) The commissioner may not require a hearing for an amendment relating to one or more of the following issues:
(1) a stock dividend resulting from a legal transfer of surplus to capital;
(2) a change in the name of the insurance company; or
(3) a change in the location of the insurance company's principal business office. (V.T.I.C. Art. 2.03 (part).)
Sec. 822.158. DETERMINATION ON APPLICATION FOR CHARTER AMENDMENT. (a) Not later than the 60th day after the date the application under Section 822.155 is filed, the commissioner shall determine whether:
(1) the proposed capital structure of the insurance company meets the requirements of this code;
(2) the officers, directors, and managing head of the insurance company have sufficient insurance experience, ability, standing, and good record to make success of the company probable;
(3) the applicants are acting in good faith;
(4) if the proposed amendment relates to a diminution of the insurance company's charter powers with respect to the kinds of insurance business in which the company may be engaged, all liabilities incidental to the exercise of the powers to be eliminated have been terminated or wholly reinsured; and
(5) the property involved in an increase of capital or surplus, or both, is:
(A) properly valued; and
(B) in the form authorized by Section 822.204 and Article 2.10, to the extent those provisions apply.
(b) If the commissioner determines by an affirmative finding any of the issues set out by Subsection (a) adversely to the applicants, the commissioner shall reject the application.
(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application and the amendment shall be filed with the department.
(d) Except as provided by Subsection (e), when an amendment to an insurance company's charter is filed with the department, the amendment is effective.
(e) On approval of a certificate required under Section 822.156 and receipt of a fee in the amount determined under Article 4.07, the commissioner shall issue to the directors a certified copy of an amendment authorizing the issuance of shares of stock without par value that is filed under this section. The amendment is effective on issuance of the certified copy of the amendment. (V.T.I.C. Art. 2.03 (part); Art. 2.07, Sec. 4 (part).)
[Sections 822.159-822.200 reserved for expansion]
SUBCHAPTER E. CAPITAL, SURPLUS, AND GUARANTY FUND
REQUIREMENTS
Sec. 822.201. APPLICABILITY OF CAPITAL AND SURPLUS REQUIREMENTS. The capital and surplus requirements of this chapter apply to each insurance company or other entity, other than a farm mutual insurance company, authorized to write property and casualty insurance in this state including:
(1) a county mutual insurance company;
(2) a mutual insurance company, other than a mutual life insurance company;
(3) a Lloyd's plan; and
(4) a reciprocal or interinsurance exchange. (V.T.I.C. Art. 2.01, Subsec. (g).)
Sec. 822.202. FULL COVERAGE AUTOMOBILE INSURANCE; DETERMINATION OF AMOUNTS. Full coverage automobile insurance is one line of casualty insurance for purposes of determining:
(1) the amount of capital and surplus of a capital stock company under this code;
(2) the amount of surplus of a mutual insurance company or reciprocal exchange under this code; or
(3) the amount of the guaranty fund and surplus of a Lloyd's plan under this code. (V.T.I.C. Art. 2.02, Subsec. (a) (part).)
Sec. 822.203. CAPITAL REQUIRED GENERALLY. To engage in the kinds of insurance business for which an insurance company organized under this chapter holds a certificate of authority, the company must have at least the minimum amount of capital required for a newly incorporated company under Section 822.054. (V.T.I.C. Art. 2.20 (part).)
Sec. 822.204. FORM OF CAPITAL AND SURPLUS. (a) After incorporation and the issuance of a certificate of authority to an insurance company, the minimum capital stock and surplus of the company may consist only of:
(1) United States currency;
(2) bonds of this state;
(3) bonds or other evidences of indebtedness of the United States the principal and interest of which are guaranteed by the United States;
(4) bonds or other interest-bearing evidences of indebtedness of a county or municipality of this state; and
(5) notes secured by first mortgages:
(A) on otherwise unencumbered real property in this state the title to which is valid; and
(B) the payment of which is insured wholly or partly by the United States.
(b) Not more than 50 percent of the minimum capital stock and minimum surplus of an insurance company may be invested in an investment described by Subsection (a)(5). (V.T.I.C. Art. 2.08.)
Sec. 822.205. UNENCUMBERED SURPLUS OR GUARANTY FUND REQUIREMENTS FOR CERTAIN INSURANCE COMPANIES. (a) This section applies only to an insurance company that:
(1) writes insurance only in this state; and
(2) is not required by law to have capital stock.
(b) Notwithstanding any other provision of this subchapter other than Sections 822.212(b) and (c), an insurance company must have a minimum amount of unencumbered surplus or a minimum amount of guaranty fund and unencumbered surplus equal to the greater of:
(1) the amount of unencumbered surplus or the amount of guaranty fund and surplus, as appropriate, the company was required to have on August 31, 1991; or
(2) one-third of the company's net written premium for the preceding 12 months after deducting:
(A) lawfully ceded reinsurance; and
(B) any policy fees not ceded to reinsurers. (V.T.I.C. Art. 2.20, Subsec. (f).)
Sec. 822.206. REPURCHASE OF CAPITAL STOCK BY TENDER OFFER OR PRIVATE TRANSACTION. (a) An insurance company may, on prior approval of the department, purchase outstanding shares of the company's capital stock in accordance with the Texas Business Corporation Act either by making a tender offer or by entering into a negotiated private transaction.
(b) The application for approval under Subsection (a) must:
(1) state the number of shares offered;
(2) describe the shares;
(3) contain any pertinent information regarding the value of the shares, including:
(A) the price offered by the company for the shares;
(B) the book value of the shares; and
(C) the market value of the shares if a market exists for those shares; and
(4) demonstrate that the shares will be purchased using uncommitted earned surplus.
(c) Before filing the application the insurance company must present a copy of the application to the seller of the shares.
(d) The commissioner shall approve the application promptly if:
(1) the price offered by the insurance company for the shares appears to be a reasonably fair price; and
(2) the application complies with the requirements of this section and the Texas Business Corporation Act. (V.T.I.C. Art. 2.07, Sec. 7(a).)
Sec. 822.207. REPURCHASE OF CAPITAL STOCK ON OPEN MARKET. (a) On prior approval of the commissioner, an insurance company, the capital stock of which is listed on a national securities exchange, may purchase from time to time outstanding shares of the company's capital stock on the open market. The shares must be purchased:
(1) in the name of the company for its own account; and
(2) in accordance with the Texas Business Corporation Act.
(b) The application for approval under Subsection (a) must:
(1) state the maximum number of shares to be purchased;
(2) state the maximum period, not to exceed 180 days, during which the purchase will be made;
(3) describe the shares;
(4) contain a commitment that the company will not pay a price for the shares to be purchased that is greater than an amount equal to the average of the bid price and the asked price at the time of the purchase plus a standard broker's commission;
(5) contain any pertinent information relating to the value of the shares, including the book value of the shares; and
(6) demonstrate that the shares will be purchased using uncommitted earned surplus.
(c) The commissioner shall approve the application promptly if the application complies with the requirements of this section and the Texas Business Corporation Act. (V.T.I.C. Art. 2.07, Sec. 7(b).)
Sec. 822.208. APPLICATION FOR REPURCHASE OF COMPANY'S SHARES SUBJECT TO OTHER LAW. An application filed by an insurance company under Section 822.206 or 822.207 is subject to the substantive requirements for the approval of payment of an extraordinary dividend under Chapter 823. (V.T.I.C. Art. 2.07, Sec. 7(d).)
Sec. 822.209. REINVESTMENT OF CAPITAL STOCK. An insurance company may, as circumstances require, exchange and reinvest its capital stock in like securities. (V.T.I.C. Art. 2.09.)
Sec. 822.210. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND SURPLUS AMOUNTS. (a) The commissioner by rule or guideline may require an insurance company organized under this chapter to maintain capital and surplus in amounts that exceed the minimum amounts required by this chapter because of:
(1) the nature and kind of risks the company underwrites or reinsures;
(2) the premium volume of risks the company underwrites or reinsures;
(3) the composition, quality, duration, or liquidity of the company's investments;
(4) fluctuations in the market value of securities the company holds; or
(5) the adequacy of the company's reserves.
(b) A rule adopted under Subsection (a) must be designed to ensure the financial solvency of an insurance company for the protection of policyholders.
(c) An insurance company that, after notifying the commissioner, ceases to write or assume business continues to be subject to this section. (V.T.I.C. Art. 2.02, Subsec. (b); Art. 2.20, Subsecs. (d), (e) (part).)
Sec. 822.211. ACTION OF COMMISSIONER WHEN CAPITAL OR SURPLUS REQUIREMENTS NOT SATISFIED. If an insurance company does not comply with the capital and surplus requirements of this chapter, the commissioner may enter an order prohibiting the company from writing new business and may:
(1) place the company under state supervision or conservatorship;
(2) declare the company to be in a hazardous condition as provided by Article 1.32;
(3) declare the company to be impaired as provided by Section 5, Article 1.10; or
(4) apply to the company any other applicable sanction provided by this code. (V.T.I.C. Art. 2.02, Subsec. (c).)
Sec. 822.212. INCREASE OF CAPITAL AND SURPLUS. (a) Notwithstanding Section 822.203, to engage in the kinds of insurance business for which an insurance company organized under this chapter holds a certificate of authority in this state, an insurance company organized under this chapter that on September 1, 1991, had less than the minimum amount of capital and surplus required for a newly incorporated company under Section 822.054 must:
(1) not later than December 31, 2000, have increased the amount of its capital by at least 90 percent of the difference between the amount of minimum capital required for a newly incorporated company under Section 822.054 and the amount of the company's capital on December 31, 1991; and
(2) not later than December 31, 2001, have at least the minimum amount of capital required under Section 822.054 for a newly incorporated company.
(b) An insurance company that on September 1, 1991, had less than the minimum amount of capital and surplus required for a newly incorporated company under Section 822.054 shall immediately increase the amount of its capital and surplus to an amount equal to the required amount of capital and surplus under Section 822.054 if there is:
(1) a change in the control of at least 50 percent of the voting securities of the insurance company;
(2) a change in the control of at least 50 percent of the voting securities of a holding company controlling the insurance company; or
(3) a change in control of at least 50 percent by any other method of control if the insurance company or holding company is not controlled by voting securities.
(c) For purposes of Subsection (b), a transfer of ownership that occurs because of death, regardless of whether the decedent dies testate or intestate, may not be considered a change in the control of an insurance company or holding company if ownership is transferred solely to one or more individuals each of whom would be an heir of the decedent if the decedent had died intestate.
(d) An insurance company that, after notifying the commissioner, ceases to write or assume business is not required to comply with this section. If the company resumes writing business at a later date, the company shall comply with this section on the date the company resumes business. (V.T.I.C. Art. 2.20, Subsecs. (a), (b), (c) (part), (e) (part).)
CHAPTER 823. INSURANCE HOLDING COMPANY SYSTEMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 823.001. FINDINGS AND PURPOSE
Sec. 823.002. DEFINITIONS
Sec. 823.003. CLASSIFICATION AS AFFILIATE OR SUBSIDIARY
Sec. 823.004. CLASSIFICATION AS COMMERCIALLY DOMICILED INSURER
Sec. 823.005. DESCRIPTION OF CONTROL; DETERMINATION
OF CONTROL
Sec. 823.006. DESCRIPTION OF INSURANCE HOLDING COMPANY SYSTEM
Sec. 823.007. DESCRIPTION OF VOTING SECURITY
Sec. 823.008. STANDARD FOR DETERMINING SURPLUS REASONABLENESS
AND ADEQUACY
Sec. 823.009. SITUS OF SECURITIES OF DOMESTIC INSURER
Sec. 823.010. DISCLAIMER OF AFFILIATION
Sec. 823.011. CONFIDENTIALITY OF INFORMATION
Sec. 823.012. RULES; PROCEDURES FOR CONSIDERING CERTAIN
DISTRIBUTIONS
Sec. 823.013. MANDAMUS
Sec. 823.014. APPLICABILITY OF CHAPTER TO FOREIGN OR ALIEN
INSURER
Sec. 823.015. EXEMPTION FROM CHAPTER
[Sections 823.016-823.050 reserved for expansion]
SUBCHAPTER B. REGISTRATION
Sec. 823.051. REGISTRATION BY INSURER REQUIRED
Sec. 823.052. REQUIRED INFORMATION; REGISTRATION STATEMENT
Sec. 823.053. REPORTING MATERIAL CHANGES
Sec. 823.054. MATERIAL INFORMATION
Sec. 823.055. AMENDMENTS; CONSOLIDATION OF AMENDMENTS
Sec. 823.056. TERMINATION OF REGISTRATION
Sec. 823.057. CONSOLIDATED FILING
Sec. 823.058. ALTERNATIVE REGISTRATION
Sec. 823.059. EXEMPTIONS
Sec. 823.060. VIOLATION OF SUBCHAPTER
[Sections 823.061-823.100 reserved for expansion]
SUBCHAPTER C. TRANSACTIONS OF REGISTERED INSURER
Sec. 823.101. STANDARDS FOR TRANSACTION WITH AFFILIATE
Sec. 823.102. NOTICE OF AND COMMISSIONER'S DECISION
ON CERTAIN LARGE TRANSACTIONS
Sec. 823.103. NOTICE OF AND COMMISSIONER'S DECISION ON
SPECIFIED TRANSACTIONS
Sec. 823.104. PROHIBITION OF ACTION TO AVOID APPLICATION
OF SUBCHAPTER
Sec. 823.105. TYPE OF AUTHORITY PROVIDED
Sec. 823.106. STANDARDS OF REVIEW; REASONS FOR DISAPPROVAL
Sec. 823.107. EXTRAORDINARY DISTRIBUTIONS
[Sections 823.108-823.150 reserved for expansion]
SUBCHAPTER D. CONTROL OF DOMESTIC INSURER;
ACQUISITION OR MERGER
Sec. 823.151. PRESUMPTION OF CONTROL
Sec. 823.152. EMPLOYMENT OF EXPERTS
Sec. 823.153. CONTROLLER OF DOMESTIC INSURER CONSIDERED
DOMESTIC INSURER
Sec. 823.154. REQUIREMENTS FOR ACQUISITION OR EXERCISE OF
CONTROL OF DOMESTIC INSURER
Sec. 823.155. AMENDMENT OF STATEMENT
Sec. 823.156. NOTICE EXPENSES
Sec. 823.157. APPROVAL OF ACQUISITION OF CONTROL
Sec. 823.158. PLACEMENT ON PREHEARING DOCKET
Sec. 823.159. HEARING; TIME OF DETERMINATION
Sec. 823.160. DEADLINE FOR COMPLETION OF ACQUISITION
Sec. 823.161. INSURER'S DUTY TO NOTIFY
Sec. 823.162. PROHIBITION ON CERTAIN ACTIONS RELATED TO
ACQUISITION OF CONTROL OR MERGER
Sec. 823.163. RETENTION OF CONTROL
Sec. 823.164. EXEMPTIONS FROM SUBCHAPTER
Sec. 823.165. VIOLATION OF SUBCHAPTER
[Sections 823.166-823.200 reserved for expansion]
SUBCHAPTER E. ACQUISITION STATEMENT
Sec. 823.201. ACQUIRING PERSON
Sec. 823.202. CONSIDERATION FOR ACQUISITION
Sec. 823.203. FINANCIAL INFORMATION ABOUT ACQUIRING PERSON
Sec. 823.204. PLAN FOR FUTURE OF INSURER
Sec. 823.205. VOTING SECURITIES
Sec. 823.206. ADDITIONAL INFORMATION ABOUT ACQUIRING
ORGANIZATION
Sec. 823.207. OATH OR AFFIRMATION REQUIRED
[Sections 823.208-823.250 reserved for expansion]
SUBCHAPTER F. INSURER'S LOANS TO OR INVESTMENT IN AFFILIATE
Sec. 823.251. DEFINITION
Sec. 823.252. GENERAL AUTHORITY RELATING TO AFFILIATES
Sec. 823.253. GENERAL STANDARD FOR INVESTMENT IN AFFILIATE
Sec. 823.254. STANDARD FOR INVESTMENT IN AFFILIATE BY INSURER
WITH LOW TOTAL LIABILITIES
Sec. 823.255. AGREEMENT OF AFFILIATE TO LIMIT CERTAIN
INVESTMENTS
Sec. 823.256. COMMISSIONER'S APPROVAL OF INVESTMENT
Sec. 823.257. DETERMINATION REQUIRED BEFORE INVESTMENT
Sec. 823.258. DISPOSITION OF INVESTMENT IN SUBSIDIARY AFTER
CESSATION OF CONTROL
Sec. 823.259. EXEMPTION FROM CERTAIN LIMITATIONS; INVESTMENT
AUTHORITY CUMULATIVE OF OTHER LAW
[Sections 823.260-823.300 reserved for expansion]
SUBCHAPTER G. VALUATION OF INVESTMENT FOR FINANCIAL STATEMENT
Sec. 823.301. SCOPE OF SUBCHAPTER
Sec. 823.302. BASES FOR DETERMINING VALUATION
Sec. 823.303. ADJUSTMENT TO DETERMINATION
Sec. 823.304. USE OF DIFFERENT BASES
Sec. 823.305. VALUATING ACQUIRED AFFILIATE
Sec. 823.306. USE OF UNAUDITED INFORMATION
Sec. 823.307. MODIFICATION BY COMMISSIONER
[Sections 823.308-823.350 reserved for expansion]
SUBCHAPTER H. EXAMINATIONS
Sec. 823.351. EXAMINATION OF INSURER
Sec. 823.352. LIMITATION ON POWER
Sec. 823.353. PAYMENT OF EXAMINATION COSTS
Sec. 823.354. USE OF ADVISORS
Sec. 823.355. CUMULATIVE AUTHORITY
[Sections 823.356-823.400 reserved for expansion]
SUBCHAPTER I. LIMITATIONS RELATING TO CONTROLLED INSURERS
Sec. 823.401. PROHIBITION OF INDIRECT ACTION FOR
CONTROLLED INSURER
Sec. 823.402. PROHIBITION ON VOTING CERTAIN SECURITIES
Sec. 823.403. MANAGEMENT OF CONTROLLED INSURER
[Sections 823.404-823.450 reserved for expansion]
SUBCHAPTER J. CIVIL REMEDIES AND SANCTIONS
Sec. 823.451. RECEIVERSHIP
Sec. 823.452. REVOCATION, SUSPENSION, OR NONRENEWAL OF
INSURER'S AUTHORITY
Sec. 823.453. VOIDING UNAUTHORIZED ACTION
Sec. 823.454. ADMINISTRATIVE PENALTY
Sec. 823.455. EQUITABLE RELIEF
Sec. 823.456. SEIZURE OR SEQUESTRATION OF VOTING SECURITIES
Sec. 823.457. LONG ARM JURISDICTION; SERVICE OF PROCESS
Sec. 823.458. SANCTIONS
[Sections 823.459-823.500 reserved for expansion]
SUBCHAPTER K. CRIMINAL PENALTIES
Sec. 823.501. OFFENSE OF VIOLATING CHAPTER
Sec. 823.502. OFFENSE OF SUBSCRIBING TO OR MAKING FALSE
STATEMENT
Sec. 823.503. BEGINNING CRIMINAL PROCEEDINGS
CHAPTER 823. INSURANCE HOLDING COMPANY SYSTEMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 823.001. FINDINGS AND PURPOSE. (a) It is consistent with the public interest and the interest of policyholders to permit insurers to:
(1) engage in activities that would enable the insurers to make better use of management skills and facilities;
(2) have free access to capital markets that could provide funds for insurers to use in diversification programs;
(3) implement sound tax planning conclusions; and
(4) serve the changing needs of the public and adapt to changing conditions of the social, economic, and political environment, so that insurers are able to compete effectively and to meet the growing public demand for institutions capable of providing a comprehensive range of financial services.
(b) The public interest and the interests of policyholders are adversely affected if:
(1) control of an insurer is sought by persons who would use the control adversely to the interest of policyholders;
(2) acquisition of control of an insurer substantially lessens competition or creates a monopoly in the insurance business in this state;
(3) an insurer that is part of a holding company system is caused to enter into transactions or relationships with affiliated companies on terms that are not fair and reasonable; or
(4) an insurer pays dividends to shareholders that jeopardize the financial condition of the insurer.
(c) The purpose of this article is to promote the public interest by:
(1) facilitating the achievement of the objectives described by Subsection (a);
(2) requiring disclosure of pertinent information relating to and approval of changes in control of an insurer;
(3) requiring disclosure and approval of material transactions and relationships between the insurer and the insurer's affiliates, including certain dividends to shareholders paid by the insurer; and
(4) providing standards governing material transactions between the insurer and the insurer's affiliates.
(d) It is desirable to prevent unnecessary multiple and conflicting regulation of insurers. In accordance with this purpose and except as provided by this chapter, this state shall exercise regulatory authority under this chapter only with respect to domestic insurers. (V.T.I.C. Art. 21.49-1, Sec. 1.)
Sec. 823.002. DEFINITIONS. In this chapter:
(1) "Acquiring person" means the person who is acquiring control of a domestic insurer or on whose behalf control of a domestic insurer is being acquired.
(2) "Controlled insurer" means an insurer that is controlled directly or indirectly by a holding company.
(3) "Controlled person" means a person, other than a controlled insurer, who is controlled directly or indirectly by a holding company.
(4) "Domestic insurer" includes a commercially domiciled insurer described by Section 823.004.
(5) "Holding company" means a person who directly or indirectly controls an insurer. The term does not include the United States, a state or a political subdivision, agency, or other instrumentality of a state, or a corporation that is wholly owned directly or indirectly by the United States, a state, or an instrumentality of a state.
(6) "Insurer" means any insurance company organized under the laws of this state, a commercially domiciled insurer, or an insurer authorized to engage in the business of insurance in this state. The term includes a capital stock company, mutual company, farm mutual insurance company, title insurance company, fraternal benefit society, local mutual aid association, statewide mutual assessment company, county mutual insurance company, Lloyd's plan, reciprocal or interinsurance exchange, stipulated premium insurance company, and group hospital service corporation. The term does not include the United States, a state, or an agency, authority, instrumentality, or political subdivision of a state.
(7) "Person" means an individual, corporation, partnership, association, joint stock company, trust, or unincorporated organization, or a similar entity or a combination of the listed entities acting in concert. The term does not include a securities broker while performing no more than a function that is usual and customary for a securities broker. (V.T.I.C. Art. 21.49-1, Secs. 2(e), (f), (g), (h), (j), (k), (o), 5(b) (part).)
Sec. 823.003. CLASSIFICATION AS AFFILIATE OR SUBSIDIARY. (a) A person is an affiliate of another if the person directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with the other person.
(b) A person is a subsidiary of another if the person is an affiliate of and is controlled by the other person directly or indirectly through one or more intermediaries.
(c) A subsidiary or holding company of a person is an affiliate of that person. (V.T.I.C. Art. 21.49-1, Secs. 2(a), (m); New.)
Sec. 823.004. CLASSIFICATION AS COMMERCIALLY DOMICILED INSURER. (a) For purposes of this chapter, a foreign or alien insurer authorized to engage in the business of insurance in this state is a commercially domiciled insurer if during the period described by Subsection (b) the average of the gross premiums written by the insurer in this state is:
(1) more than the average of the gross premiums written by the insurer in its state of domicile; and
(2) 30 percent or more of the total gross premiums written by the insurer in the United States, as reported in its three most recent annual statements.
(b) The period applicable to Subsection (a) is:
(1) the three most recent fiscal years of the insurer that precede the fiscal year in which the determination under this section is made; or
(2) if the insurer has been authorized to engage in the business of insurance in this state for less than the period described by Subdivision (1), the period for which the insurer has been authorized to engage in the business of insurance in this state. (V.T.I.C. Art. 21.49-1, Sec. 2(b).)
Sec. 823.005. DESCRIPTION OF CONTROL; DETERMINATION OF CONTROL. (a) For purposes of this chapter, control is the power to direct, or cause the direction of, the management and policies of a person, other than power that results from an official position with or corporate office held by the person. The power may be possessed directly or indirectly by any means, including through the ownership of voting securities or by contract, other than a commercial contract for goods or nonmanagement services.
(b) For purposes of this chapter, a person controls another if the person possesses the power described by Subsection (a) with regard to the other person.
(c) After providing notice and opportunity for hearing to each person in interest, the commissioner may determine that, notwithstanding the absence of a presumption under Section 823.151, a person controls an authorized insurer if the person, directly or indirectly and alone or under an agreement with one or more other persons, exercises such a controlling influence over the management or policies of the insurer that it is necessary or appropriate in the public interest or for the protection of the insurer's policyholders that the person be considered to control the insurer. The commissioner shall make specific findings of fact to support a determination under this subsection. (V.T.I.C. Art. 21.49-1, Sec. 2(d) (part).)
Sec. 823.006. DESCRIPTION OF INSURANCE HOLDING COMPANY SYSTEM. An insurance holding company system consists of two or more affiliates, at least one of which is an insurer. (V.T.I.C. Art. 21.49-1, Sec. 2(i).)
Sec. 823.007. DESCRIPTION OF VOTING SECURITY. For purposes of this chapter, a voting security is a security or an instrument that:
(1) has the power at a meeting of shareholders of a person to vote for or against the election of directors of the person or any other matter involving the direction of the management and policies of the person; or
(2) under rules adopted by the commissioner in the public interest, the commissioner considers to be of similar nature to that described by Subdivision (1) and considers necessary or appropriate to treat as a voting security. (V.T.I.C. Art. 21.49-1, Sec. 2(n).)
Sec. 823.008. STANDARD FOR DETERMINING SURPLUS REASONABLENESS AND ADEQUACY. (a) In determining whether an insurer's policyholders' surplus is reasonable in relation to the insurer's outstanding liabilities and adequate to the insurer's financial needs, the following factors, among others, shall be considered:
(1) the size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;
(2) the extent to which the insurer's business is diversified among the different lines of insurance;
(3) the number and size of risks insured in each line of insurance;
(4) the extent of the geographical dispersion of the insurer's insured risks;
(5) the nature and extent of the insurer's reinsurance program;
(6) the quality, diversification, and liquidity of the insurer's investment portfolio;
(7) the recent past and projected future trend in the size of the insurer's:
(A) policyholders' surplus; and
(B) investment portfolio;
(8) the policyholders' surplus maintained by comparable insurers;
(9) the adequacy of the insurer's reserves;
(10) the quality and liquidity of investments in subsidiaries made under Subchapter F; and
(11) the quality of the insurer's earnings and the extent to which the insurer's reported earnings include extraordinary items.
(b) The commissioner may treat an investment described by Subsection (a)(10) as a nonadmitted or disallowed asset for purposes of Subsection (a) if in the commissioner's judgment the investment justifies that treatment. (V.T.I.C. Art. 21.49-1, Sec. 4(b).)
Sec. 823.009. SITUS OF SECURITIES OF DOMESTIC INSURER. For purposes of this chapter, the situs of the ownership of securities of a domestic insurer is considered to be in this state. (V.T.I.C. Art. 21.49-1, Sec. 12(c) (part).)
Sec. 823.010. DISCLAIMER OF AFFILIATION. (a) A disclaimer of affiliation with an authorized insurer may be filed with the commissioner by any person, including the authorized insurer or a member of an insurance holding company system.
(b) The disclaimer must fully disclose:
(1) all material relationships and bases for affiliation between the person and the insurer; and
(2) the basis for disclaiming the affiliation.
(c) After the disclaimer is filed:
(1) the insurer is not required to register or report under Subchapter B because of a duty that arises out of the insurer's relationship with the person unless the commissioner disallows the disclaimer, in which event the duty to register or report begins on the date of the disallowance; and
(2) the person is not required to comply with Sections 823.154, 823.155, 823.159, and 823.160 unless the commissioner disallows the disclaimer.
(d) The commissioner may disallow the disclaimer only after:
(1) providing to each party in interest notice of and the opportunity to be heard on the disallowance; and
(2) making specific findings of fact to support the disallowance. (V.T.I.C. Art. 21.49-1, Sec. 3(j).)
Sec. 823.011. CONFIDENTIALITY OF INFORMATION. (a) This section applies only to information, including documents and copies of documents, that is:
(1) reported under Subchapter B; or
(2) obtained by or disclosed to the commissioner or another person in the course of an examination or investigation under Subchapter H.
(b) The information shall be treated confidentially and is not subject to subpoena. Except as provided by Subsections (c) and (d), the information may not be disclosed without the prior written consent of the insurer to which it pertains.
(c) The commissioner may publish all or any part of the information in the manner that the commissioner considers appropriate if the commissioner, after giving the insurer and its affected affiliates notice and an opportunity to be heard, determines that the interests of policyholders or the public will be served by the publication of the information.
(d) The commissioner or another person may disclose the information to any of the following entities functioning in an official capacity:
(1) an insurance department of another state;
(2) an authorized law enforcement official;
(3) a district attorney of this state;
(4) the attorney general; or
(5) a grand jury. (V.T.I.C. Art. 21.49-1, Sec. 10.)
Sec. 823.012. RULES; PROCEDURES FOR CONSIDERING CERTAIN DISTRIBUTIONS. (a) The commissioner may, after notice and opportunity for all interested persons to be heard, adopt rules and issue orders to implement this chapter, including the conducting of business and proceedings under this chapter.
(b) The commissioner by rule shall establish procedures to:
(1) promptly consider the prepayment notices reported under Section 823.053(b);
(2) annually review each reported ordinary dividend paid within the 12 months preceding the date of the report; and
(3) take appropriate actions authorized by this code.
(c) A procedure established under Subsection (b)(1) must include consideration of the factors provided by Section 823.007.
(d) A rule or order under this section must be consistent with this chapter. (V.T.I.C. Art. 21.49-1, Secs. 3(d) (part), 11 (part).)
Sec. 823.013. MANDAMUS. A person aggrieved by the failure of the commissioner to act, including making a determination, as required by this chapter may petition a district court of Travis County for a writ in the nature of a mandamus or a peremptory mandamus directing the commissioner to immediately act or make the determination. (V.T.I.C. Art. 21.49-1, Sec. 17(c).)
Sec. 823.014. APPLICABILITY OF CHAPTER TO FOREIGN OR ALIEN INSURER. (a) A foreign insurer that is authorized to engage in the business of insurance in this state and that is domiciled in a jurisdiction that has not adopted, by statute or regulation, controls considered by the commissioner to be substantially similar to those provided by this chapter:
(1) is subject to this chapter to the same extent as a domestic insurer; and
(2) on failure to comply with this chapter, is subject to all remedies, penalties, and sanctions authorized by this code in the same manner as a domestic insurer, including, after notice and hearing, the suspension or revocation of the insurer's certificate of authority to engage in the business of insurance in this state.
(b) If a jurisdiction adopts controls considered by the commissioner to be substantially similar to those provided by this chapter, the commissioner after that adoption may exempt an insurer domiciled in that jurisdiction from the application of this section.
(c) Notwithstanding Subsection (a), a foreign or alien insurer is not subject to this chapter if the commissioner has approved a withdrawal plan for the insurer under Chapter 827. (V.T.I.C. Art. 21.49-1, Sec. 18.)
Sec. 823.015. EXEMPTION FROM CHAPTER. (a) This chapter does not apply to an insurance holding company system if each affiliate in the system is privately owned by not more than five security holders, each of whom is an individual. For purposes of this subsection, a person is a security holder of another if the person owns any security of the other person, including common stock, preferred stock, a debt obligation, and any other security convertible into or evidencing the right to acquire stock or a debt obligation.
(b) The commissioner may exempt from the application of this chapter a commercially domiciled insurer that the commissioner determines has assets physically located in this state or an asset-to-liability ratio sufficient to justify the conclusion that there is no reasonable danger that the operations or conduct of the business of the insurer could present a danger of loss to the policyholders of this state. (V.T.I.C. Art. 21.49-1, Secs. 2(l), (r), (s).)
[Sections 823.016-823.050 reserved for expansion]
SUBCHAPTER B. REGISTRATION
Sec. 823.051. REGISTRATION BY INSURER REQUIRED. (a) Each insurer authorized to engage in the business of insurance in this state that is a member of an insurance holding company system shall register with the commissioner. The insurer shall register not later than the 15th day after the date the insurer becomes subject to registration under this subchapter.
(b) The commissioner for good cause shown may extend the period for registration under this section. (V.T.I.C. Art. 21.49-1, Sec. 3(a) (part).)
Sec. 823.052. REQUIRED INFORMATION; REGISTRATION STATEMENT. (a) To register as required by Section 823.051, an insurer must file with the department a registration statement and a copy of the charter or articles of incorporation and bylaws of the insurer's holding company, each of the insurer's subsidiaries, and, if the commissioner considers the information necessary, any of the insurer's other affiliates.
(b) The registration statement must contain current information about:
(1) the identity and relationship of each affiliate in the insurance holding company system of which the insurer is a part;
(2) the capital structure, general financial condition, and ownership and management of the insurer, the insurer's holding company, the insurer's subsidiaries, and, if the commissioner considers the information necessary, any of the insurer's other affiliates; and
(3) any pledge of stock of the insurer or a subsidiary or controlling affiliate of the insurer for a loan made to a member of the insurer's insurance holding company system.
(c) The registration statement must also contain information about:
(1) each outstanding loan the insurer makes to an affiliate of the insurer or an affiliate makes to the insurer;
(2) each purchase, sale, or exchange of securities or other investment between the insurer and an affiliate of the insurer;
(3) each purchase, sale, or exchange of assets between the insurer and an affiliate of the insurer;
(4) each management and service contract or cost-sharing arrangement between the insurer and an affiliate of the insurer;
(5) each reinsurance agreement between the insurer and an affiliate of the insurer that covers one or more lines of insurance of the ceding company;
(6) each agreement between the insurer and an affiliate of the insurer to consolidate federal income tax returns;
(7) each transaction between the insurer and an affiliated financial institution;
(8) each transaction between the insurer and an affiliate of the insurer that is not in the ordinary course of business;
(9) each guarantee or undertaking, other than an insurance contract entered into in the ordinary course of the insurer's business, for the benefit of an affiliate of the insurer that results in a contingent exposure of the insurer's assets to liability;
(10) each dividend or distribution to the insurer's shareholders; and
(11) each transaction between the insurer and an affiliate of the insurer not specified by this subsection that is subject to Section 823.102, 823.103, or 823.104.
(d) The information required by Subsection (c) applies only to agreements in force, relationships subsisting, and transactions outstanding.
(e) The commissioner shall adopt the format of the registration statement. In adopting or revising the format, the commissioner may require information on other matters concerning transactions between a registered insurer and an affiliate of the insurer. (V.T.I.C. Art. 21.49-1, Sec. 3(b).)
Sec. 823.053. REPORTING MATERIAL CHANGES. (a) To keep the information required to be disclosed in a registration statement filed under Section 823.052 current, a registered insurer shall report each material change to the information, including the addition of information, not later than the 15th day after the last day of the month in which the insurer learns of the change.
(b) Subject to Section 823.107, each registered insurer shall report each dividend or distribution made to the shareholders not later than the earlier of:
(1) the second business day after the date the distribution is declared; or
(2) the 11th day before the date of payment.
(c) For purposes of this section, reports are considered to be made when received by the department.
(d) Reports made under this section are for informational purposes only.
(e) An insurer is not required to report under this section a transaction that is approved under Section 823.102 or 823.103. That approval is considered to be an amendment of the registration statement filed under Section 823.052 without being reported under this section. (V.T.I.C. Art. 21.49-1, Secs. 3(d) (part), 4(d)(6).)
Sec. 823.054. MATERIAL INFORMATION. (a) Information about a transaction is not required to be disclosed on a registration statement filed under Section 823.052 or in a report under Section 823.053 unless the transaction is considered to be material under this section.
(b) If the amount of a single transaction or the total amount of all transactions involving sales, purchases, exchanges, loans or other extensions of credit, or investments is more than the lesser of one-half of one percent of an insurer's admitted assets or five percent of an insurer's surplus, as of December 31 of the year preceding the date of the transaction or transactions, the transaction or transactions, respectively, are considered to be material for purposes of this section.
(c) Each dividend or distribution to shareholders is material for the purposes of this section.
(d) The commissioner, by rule or order, may provide a standard that is different from the standard provided by Subsection (b). (V.T.I.C. Art. 21.49-1, Sec. 3(c).)
Sec. 823.055. AMENDMENTS; CONSOLIDATION OF AMENDMENTS. (a) In this section, "ultimate controlling person" means the person in an insurance holding company system who is not controlled by another person.
(b) Not later than the 120th day after the last day of each fiscal year of the ultimate controlling person, each registered insurer in the ultimate controlling person's insurance holding company system shall file an amendment to the insurer's registration statement filed under this subchapter to make the registration statement current.
(c) Not later than the 120th day after the last day of each calendar year ending in a five or a zero, each registered insurer in the ultimate controlling person's insurance holding company system shall file a completely restated registration statement that consolidates all amendments to the most recently filed registration statement into that statement and contains all changes occurring since the last amendment was filed. The consolidated registration statement must be in the format that the commissioner adopts by rule.
(d) A registered insurer is not required to file an amendment under Subsection (b) in the year in which the insurer files a consolidated registration statement under Subsection (c). (V.T.I.C. Art. 21.49-1, Secs. 2(q), 3(e).)
Sec. 823.056. TERMINATION OF REGISTRATION. The commissioner shall terminate the registration of an insurer that demonstrates that the insurer has ceased to be a member of an insurance holding company system. (V.T.I.C. Art. 21.49-1, Sec. 3(f).)
Sec. 823.057. CONSOLIDATED FILING. The commissioner may require or permit two or more insurers that are affiliates of each other and that are required to register under this chapter to file:
(1) a consolidated registration statement; or
(2) a consolidated report amending:
(A) the consolidated registration statement; or
(B) the individual registration statement of each insurer. (V.T.I.C. Art. 21.49-1, Sec. 3(g).)
Sec. 823.058. ALTERNATIVE REGISTRATION. The commissioner may permit an insurer authorized to engage in the business of insurance in this state that is a part of an insurance holding company system to:
(1) register on behalf of another insurer that is an affiliate of the insurer and that is required to register under Section 823.051; and
(2) file on behalf of the affiliate all information and material required to be filed under this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 3(h).)
Sec. 823.059. EXEMPTIONS. (a) The registration requirement under Section 823.051 does not apply to a foreign or nondomestic insurer, other than a commercially domiciled insurer, that is subject to disclosure requirements adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to the disclosure requirements provided by this chapter.
(b) The commissioner may require an insurer that is exempt from registration under Subsection (a) to provide a copy of the registration statement or other information filed by the insurer with the insurance regulatory authority of its domiciliary jurisdiction.
(c) The commissioner, by rule or order, may exempt an insurer, information, or a transaction from the application of this subchapter. (V.T.I.C. Art. 21.49-1, Secs. 3(a) (part), (i).)
Sec. 823.060. VIOLATION OF SUBCHAPTER. The failure to file a registration statement or an amendment to a registration statement within the time specified for filing the statement or amendment, as required by this subchapter, is a violation of this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 3(k).)
[Sections 823.061-823.100 reserved for expansion]
SUBCHAPTER C. TRANSACTIONS OF REGISTERED INSURER
Sec. 823.101. STANDARDS FOR TRANSACTION WITH AFFILIATE. (a) This section applies only to a material transaction between a registered insurer and an affiliate of the insurer.
(b) The terms of the transaction shall be fair and equitable.
(c) The charges or fees for services performed shall be reasonable.
(d) The books, accounts, and records of each party to the transaction shall be maintained so that the precise nature and details of the transaction are clearly and accurately disclosed.
(e) The expenses incurred and payments received relating to the transaction shall be allocated to the registered insurer on an equitable basis in conformity with customary insurance accounting principles consistently applied.
(f) After a registered insurer pays a dividend or makes a distribution to a holding company or shareholder affiliate of the insurer, the insurer's policyholders' surplus shall be reasonable in relation to the insurer's outstanding liabilities and adequate to the insurer's financial needs. (V.T.I.C. Art. 21.49-1, Sec. 4(a).)
Sec. 823.102. NOTICE OF AND COMMISSIONER'S DECISION ON CERTAIN LARGE TRANSACTIONS. (a) This section applies only to a sale, purchase, exchange, loan or other extension of credit, or investment between a domestic insurer and any person in the insurer's insurance holding company system that involves more than the lesser of 5 percent of the insurer's admitted assets or 25 percent of the insurer's surplus, as of December 31 of the year preceding the year in which the transaction occurs.
(b) A person may not enter into a transaction to which this section applies before the date on which the transaction is approved under Subsection (c).
(c) A domestic insurer shall notify the commissioner of a transaction to which this section applies. The commissioner shall approve or disapprove the transaction in writing not later than the 90th day after the date of the notification. If the commissioner fails to act as required by this subsection, the transaction is considered approved. (V.T.I.C. Art. 21.49-1, Sec. 4(d)(1).)
Sec. 823.103. NOTICE OF AND COMMISSIONER'S DECISION ON SPECIFIED TRANSACTIONS. (a) This section applies only to:
(1) a sale, purchase, exchange, loan or other extension of credit, or investment between a domestic insurer and any person in the insurer's insurance holding company system:
(A) that involves more than the lesser of one-half of one percent of the insurer's admitted assets or five percent of the insurer's surplus, as of December 31 of the year preceding the year in which the transaction occurs; and
(B) the approval of which is not required under Section 823.102;
(2) a reinsurance agreement, including a reinsurance treaty, between a domestic insurer and any person in the insurer's holding company system or a modification of such an agreement;
(3) a rendering of services between a domestic insurer and any person in the insurer's holding company system on a regular or systematic basis; or
(4) any material transaction between a domestic insurer and any person in the insurer's holding company system that is specified by rule and that the commissioner determines may adversely affect the interests of the insurer's policyholders or of the public.
(b) Subsection (a)(2) includes a reinsurance agreement that requires as consideration a transfer of assets from an insurer to a nonaffiliate and in relation to which the insurer and nonaffiliate agree that any part of the transferred assets are to be transferred to one or more affiliates of the insurer.
(c) A domestic insurer shall give to the commissioner written notice of the insurer's intent to enter into a transaction to which this section applies before the 30th day preceding the date of the proposed transaction. The commissioner may authorize a shorter period of notice under this subsection.
(d) A domestic insurer may not enter into a transaction for which the insurer gives notice under Subsection (c) if the commissioner disapproves the proposed transaction during the period for notice. (V.T.I.C. Art. 21.49-1, Sec. 4(d)(2).)
Sec. 823.104. PROHIBITION OF ACTION TO AVOID APPLICATION OF SUBCHAPTER. (a) A domestic insurer may not enter into transactions with persons in the insurer's insurance holding company system if:
(1) the transactions are part of a plan or series of similar transactions; and
(2) the purpose of entering into the transactions is to avoid a threshold amount provided by Section 823.102 or 823.103.
(b) If the commissioner determines that over any 12-month period a domestic insurer enters into transactions that violate Subsection (a), the commissioner may:
(1) consider the cumulative effect of the transactions; and
(2) apply:
(A) Section 823.102 or 823.103; or
(B) sanctions under this code. (V.T.I.C. Art. 21.49-1, Sec. 4(d)(3).)
Sec. 823.105. TYPE OF AUTHORITY PROVIDED. Nothing in Section 823.102, 823.103, or 823.104 authorizes a transaction that would violate law that is applicable to an insurer that is not subject to this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 4(d)(4).)
Sec. 823.106. STANDARDS OF REVIEW; REASONS FOR DISAPPROVAL. (a) In reviewing a transaction under this subchapter, the commissioner shall consider whether the transaction:
(1) complies with the standards provided by Section 823.101; and
(2) may adversely affect the interest of the insurer's policyholders.
(b) The commissioner shall set forth the specific reasons for the disapproval of a transaction reviewed under Subsection (a). (V.T.I.C. Art. 21.49-1, Sec. 4(d)(5).)
Sec. 823.107. EXTRAORDINARY DISTRIBUTIONS. (a) Except as provided by Subsection (b), for purposes of this section, an extraordinary distribution includes the payment of a dividend or distribution of cash or other property, the fair market value of which combined with the fair market value of each other dividend or distribution made in the preceding 12 months exceeds the greater of:
(1) 10 percent, or 20 percent if the insurer is a title insurer, of the insurer's policyholders' surplus, as of December 31 of the year preceding the year in which the fair market value is being determined; or
(2) the net gain from operations of the insurer, if the insurer is a life or title insurer, or the net income, if the insurer is another type of insurer, for the calendar year preceding the year in which the fair market value is being determined.
(b) For purposes of this section, an extraordinary distribution does not include pro rata distributions of any class of securities of the insurer.
(c) An insurer that is required to register under Subchapter B shall give the commissioner notice of the insurer's intent to make an extraordinary distribution to shareholders, before the 30th day preceding the date of the proposed distribution. The commissioner may authorize a shorter period of notice under this subsection.
(d) An insurer may not make an extraordinary distribution for which the insurer gives notice if the commissioner disapproves the distribution during the period for the notice.
(e) A registered insurer may declare an extraordinary distribution that is conditional on its approval by the commissioner. The declaration does not confer any rights on shareholders before the distribution may be made under Subsection (d). (V.T.I.C. Art. 21.49-1, Sec. 4(c).)
[Sections 823.108-823.150 reserved for expansion]
SUBCHAPTER D. CONTROL OF DOMESTIC INSURER;
ACQUISITION OR MERGER
Sec. 823.151. PRESUMPTION OF CONTROL. (a) Control of an entity is presumed if:
(1) a person or a person and members of the person's immediate family, directly or indirectly, own, control, or hold with the power to vote 10 percent or more of the voting securities or authority of the entity; or
(2) a person who is not a corporate officer or director of the entity holds proxies representing 10 percent or more of the voting securities or authority of the entity.
(b) Control of a Lloyd's plan is presumed if a person is designated as an attorney-in-fact for the insurer under Chapter 941.
(c) Control of a reciprocal or interinsurance exchange is presumed if a person is designated as an attorney-in-fact for the exchange under Chapter 942.
(d) A presumption under this section may be rebutted by a showing made in the manner provided by Section 823.010 that control does not exist in fact and that the person rebutting the presumption is complying with Sections 823.154, 823.155, 823.159, and 823.160.
(e) For purposes of this section, the members of a person's immediate family are:
(1) the person's spouse, father, mother, children, brothers, sisters, and grandchildren;
(2) the father, mother, brothers, and sisters of the person's spouse; and
(3) the spouse of the person's child, brother, sister, mother, father, or grandparent. (V.T.I.C. Art. 21.49-1, Secs. 2(d) (part), (p).)
Sec. 823.152. EMPLOYMENT OF EXPERTS. (a) The commissioner may employ an attorney, actuary, accountant, or other expert who is not a member of the commissioner's staff and who is reasonably necessary to assist in analyzing a merger or acquisition of control proposed under Section 823.154.
(b) The acquiring person shall pay all reasonable expenses incurred in connection with the employment of a person under this section. (V.T.I.C. Art. 21.49-1, Sec. 5(c)(3).)
Sec. 823.153. CONTROLLER OF DOMESTIC INSURER CONSIDERED DOMESTIC INSURER. For purposes of this subchapter, any person who controls a domestic insurer is considered to be a domestic insurer unless:
(1) the assets of all insurance subsidiaries of the person are equal to less than 20 percent of the person's consolidated assets;
(2) the gross revenues, including investment income, of all insurance subsidiaries of the person are equal to less than 20 percent of the person's consolidated gross revenues; and
(3) the shareholders' equity of all insurance subsidiaries of the person is equal to less than 20 percent of the person's consolidated shareholders' equity. (V.T.I.C. Art. 21.49-1, Sec. 5(a)(2).)
Sec. 823.154. REQUIREMENTS FOR ACQUISITION OR EXERCISE OF CONTROL OF DOMESTIC INSURER. (a) Before a person who directly or indirectly controls, or after the acquisition would directly or indirectly control, a domestic insurer may in any manner acquire a voting security of a domestic insurer or before a person may otherwise acquire control of a domestic insurer or exercise any control over a domestic insurer:
(1) the person shall file with the commissioner a statement that satisfies the requirements of Subchapter E; and
(2) the acquisition of control must be approved by the commissioner in accordance with this subchapter.
(b) The acquiring person shall send a copy of the statement filed under this section to the domestic insurer.
(c) A statement filed under this section is subject to public inspection at the office of the commissioner. (V.T.I.C. Art. 21.49-1, Sec. 5(a)(1).)
Sec. 823.155. AMENDMENT OF STATEMENT. If a material change occurs in the facts contained in a statement filed under Section 823.154, the person required to file the statement shall, not later than the second business day after the date the person learns of the change, file with the commissioner and send to the domestic insurer an amendment stating the change and a copy of each document and other material relevant to the change. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.156. NOTICE EXPENSES. (a) A person who files a statement under Section 823.154 shall pay the expenses of mailing each related notice required by the commissioner.
(b) As security for the payment of the expenses, the person, at the request of the commissioner or the domestic insurer, shall file with the commissioner an acceptable bond or other deposit in an amount determined by the commissioner. (V.T.I.C. Art. 21.49-1, Sec. 5(d).)
Sec. 823.157. APPROVAL OF ACQUISITION OF CONTROL. The commissioner shall approve an acquisition of control for which a statement is filed under Section 823.154 unless, after a hearing, the commissioner finds that:
(1) immediately on the change of control the domestic insurer would not be able to satisfy the requirements for the issuance of a new certificate of authority to write the line or lines of insurance for which the insurer holds a certificate of authority;
(2) the effect of the acquisition of control would be substantially to lessen competition in a line or subclassification lines of insurance in this state or tend to create a monopoly in a line or subclassification lines of insurance in this state;
(3) the financial condition of the acquiring person may jeopardize the financial stability of the domestic insurer or prejudice the interest of the domestic insurer's policyholders;
(4) the acquiring person has a plan or proposal to liquidate the domestic insurer or cause the insurer to declare dividends or make distributions, sell any of its assets, consolidate or merge with any person, make a material change in its business or corporate structure or management, or enter into a material agreement, arrangement, or transaction of any kind with any person, and that the plan or proposal is unfair, prejudicial, hazardous, or unreasonable to the insurer's policyholders and not in the public interest;
(5) due to a lack of competence, trustworthiness, experience, and integrity of the persons who would control the operation of the domestic insurer, the merger or acquisition of control would not be in the interest of the insurer's policyholders and the public; or
(6) the merger or acquisition of control would violate the law of this or another state or the United States. (V.T.I.C. Art. 21.49-1, Sec. 5(c)(1).)
Sec. 823.158. PLACEMENT ON PREHEARING DOCKET. At any time after the submission or resubmission to the commissioner of a statement under Section 823.154, regardless of whether the statement is complete and accurate, the matter may be placed on the contested case docket for any prehearing matters and motions permitted under Chapter 2001, Government Code. (V.T.I.C. Art. 21.49-1, Sec. 5(c)(2) (part).)
Sec. 823.159. HEARING; TIME OF DETERMINATION. (a) A hearing under Section 823.157 shall be held not later than the 45th day after the date the statement is filed under Section 823.154.
(b) Not later than the 21st day before the date of the hearing, the commissioner shall give notice of the hearing to the person who filed the statement and to the domestic insurer unless the person and the domestic insurer waive notice.
(c) The person who filed the statement and the domestic insurer shall provide notice of the hearing in the time and manner specified by the commissioner to each person designated by the commissioner.
(d) The acquiring person has the burden of providing sufficient competent evidence for the commissioner to make the findings required under Section 823.158.
(e) The commissioner shall make a determination on the acquisition of control not later than the 60th day after the date the record of the hearing is closed. (V.T.I.C. Art. 21.49-1, Sec. 5(c)(2) (part).)
Sec. 823.160. DEADLINE FOR COMPLETION OF ACQUISITION. (a) An acquisition of control of a domestic insurer must be completed not later than the 90th day after the date of the commissioner's order approving the acquisition unless the commissioner on a showing of good cause for the delay grants an extension in writing.
(b) An increase in a company's capital and surplus required under this code because of the change of control of a domestic insurer must be completed not later than the 90th day after the date of the commissioner's order approving the change of control and before the insurance company writes any new insurance business.
(c) If a deadline under Subsection (a) or (b) is not met, the person seeking to acquire control of the domestic insurer shall resubmit the statement required by Section 823.154 and the commissioner may reconsider approval of acquisition of control under this subchapter. (V.T.I.C. Art. 21.49-1, Secs. 5(c)(4), (5).)
Sec. 823.161. INSURER'S DUTY TO NOTIFY. (a) Not later than the 30th day after the date an event requiring notice under this subchapter occurs, an insurer authorized to engage in the business of insurance in this state shall notify the commissioner in writing of the identity of any person who the insurer knows, or has reason to believe, controls or has taken any action, other than preliminary negotiations or discussions, to acquire control of the insurer.
(b) This section does not apply to a foreign insurer that is subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of the insurer's domicile that are substantially similar to the requirements and standards provided by this chapter. (V.T.I.C. Art. 21.49-1, Sec. 5(g).)
Sec. 823.162. PROHIBITION ON CERTAIN ACTIONS RELATED TO ACQUISITION OF CONTROL OR MERGER. A person may not effect or attempt to effect an acquisition of control of or merger with a domestic insurer unless the commissioner has approved the acquisition or merger. (V.T.I.C. Art. 21.49-1, Sec. 5(h) (part).)
Sec. 823.163. RETENTION OF CONTROL. (a) This section applies only to a domestic insurer that is a controlled insurer, regardless of when that control was acquired.
(b) A person violates this section if:
(1) the person is a domestic insurer, a person who controls the domestic insurer, including the insurer's holding company, or an officer or director of the insurer or controlling person who violates this chapter or otherwise demonstrates untrustworthiness affecting the domestic insurer;
(2) the person is a domestic insurer that violates Chapter 15, Business & Commerce Code, or another antitrust law of this state; or
(3) the person is a domestic insurer's affiliate that violates Chapter 15, Business & Commerce Code, or another antitrust law of this state and whose violation affects the domestic insurer.
(c) If, after notice and an opportunity for a hearing, the commissioner determines that a person violates this section, the commissioner shall issue written findings and an order based on those findings that directs the person to take appropriate action to cure the violation. The commissioner shall serve the order and findings on the person and the affected domestic insurer.
(d) In addition to this chapter, Subchapter C, Chapter 801, applies to a person who fails to comply with an order under this section.
(e) The commissioner may require the submission of any information the commissioner considers necessary to determine whether retention of control complies with this chapter and may require, as a condition of approval of the retention of control, that all or any part of that information be disclosed to the domestic insurer's shareholders. (V.T.I.C. Art. 21.49-1, Sec. 5(f).)
Sec. 823.164. EXEMPTIONS FROM SUBCHAPTER. (a) This subchapter does not apply to a transaction that is subject to:
(1) Subchapter K or L , Chapter 882; or
(2) Section 887.065 or Subchapter J or K, Chapter 887.
(b) This subchapter does not apply to a transaction that is subject to and complies with:
(1) Chapter 828; or
(2) Subchapter L, Chapter 884.
(c) This subchapter does not apply to a transaction that is subject to and complies with Sections 824.101 and 824.102 and Subchapters A and B, Chapter 824, relating to the merger or consolidation of two or more insurers, until the plan of merger or consolidation is filed by the domestic insurer with the commissioner under that chapter. After the plan is filed, the transaction is subject to this subchapter. The commissioner may exempt the transaction from this subchapter, other than the approval provisions of Sections 823.157-823.160, if the commissioner finds that the materials provided to shareholders and security holders in connection with the merger or consolidation, including the notice and proxy statement, contained reasonable and adequate information, including factual and financial disclosures and material, relating to that transaction.
(d) This subchapter does not apply to a transaction that is subject to Subchapter K, Chapter 884, if the agreement to which the transaction relates is a total direct reinsurance agreement.
(e) This subchapter does not apply to an acquisition of any voting security that, immediately before consummation of the acquisition, is not issued and outstanding by a person who is a broker-dealer under state or federal securities law if:
(1) the acquisition is solely for resale under a plan approved by the commissioner;
(2) the resale will not reasonably result in an acquisition of control; and
(3) before the resale a positive act of control relating to those shares is not committed.
(f) This subchapter does not apply to an acquisition of a voting security of a domestic insurer by a person who:
(1) controls the insurer if, after the acquisition, the person directly or indirectly owns or controls less than 50 percent of the issued and outstanding voting securities of the insurer; or
(2) before the acquisition, directly or indirectly owns or controls more than 50 percent of the issued and outstanding voting securities of the insurer.
(g) This subchapter does not apply to an acquisition of a voting security of a domestic insurer by a person who, before the acquisition, directly or indirectly owns or controls at least 10 percent but less than 50 percent of the issued and outstanding voting securities of the insurer and who, after the acquisition, directly or indirectly owns or controls 50 percent or more of the issued and outstanding voting securities of the insurer if:
(1) the person has applied in writing for the exemption; and
(2) the commissioner by order has determined that the acquisition:
(A) will not jeopardize the financial stability of the insurer;
(B) will not prejudice the interests of the insurer's policyholders; and
(C) will not adversely affect the public interest.
(h) The commissioner by order may exempt from the application of this subchapter an offer, request, invitation, agreement, or acquisition that:
(1) is not made or entered into to change or influence the control of a domestic insurer and does not have the effect of changing or influencing that control; or
(2) is not comprehended as within the purposes of this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 5(e).)
Sec. 823.165. VIOLATION OF SUBCHAPTER. The failure to file a statement, amendment, or other material required to be filed under this subchapter is a violation of this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 5(h) (part).)
[Sections 823.166-823.200 reserved for expansion]
SUBCHAPTER E. ACQUISITION STATEMENT
Sec. 823.201. ACQUIRING PERSON. (a) A statement required under Section 823.154 must contain the name and address of the acquiring person.
(b) If the acquiring person is an individual, the statement must contain:
(1) the acquiring person's principal occupation or employment;
(2) each material occupation, employment, office, or position held by the acquiring person during the preceding five-year period; and
(3) any criminal conviction of the acquiring person, other than a conviction of a minor traffic violation, during the preceding 10-year period.
(c) If the acquiring person is not an individual, the statement must contain:
(1) a report of the nature of the acquiring person's business operations during the preceding five-year period or, if the acquiring person and any predecessors of the acquiring person have been in existence for less than five years, during that shorter period;
(2) a description, complete in all material respects, of any business the acquiring person intends to begin; and
(3) a list that contains:
(A) the name of each director or executive officer of the acquiring person, or individual who performs or who is to perform, functions appropriate to that position; and
(B) for each individual listed under Paragraph (A), the information required for an individual under Subsection (b). (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.202. CONSIDERATION FOR ACQUISITION. (a) A statement required under Section 823.154 must contain:
(1) the source, nature, and amount of consideration for the acquisition of control;
(2) a description of any transaction from which the consideration for the acquisition of control is obtained; and
(3) the identity of each person providing the consideration.
(b) On request of the person filing the statement, the identity of a commercial lender who in the ordinary course of business provides consideration for the acquisition is confidential. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.203. FINANCIAL INFORMATION ABOUT ACQUIRING PERSON. (a) A statement required under Section 823.154 must contain:
(1) fully audited financial information about the earnings and financial condition of the acquiring person for the preceding three fiscal years or, if the acquiring person and any predecessors of the acquiring person have been in existence for less than three fiscal years, for that shorter period;
(2) similar unaudited financial information about the earnings and financial condition of the acquiring person as of a date not earlier than the 120th day preceding the date the statement is filed; and
(3) additional financial information in the form or substance required by the commissioner that is material to a finding under Section 823.157(3).
(b) The statement must be accompanied by an affidavit or certification of the chief financial officer of the acquiring person stating that:
(1) the unaudited financial information provided under Subsection (a) is true and correct, as of its date; and
(2) a material change in financial condition, as determined under Section 823.054, did not occur during the period beginning on the date of that information and ending on the date of the affidavit or certification.
(c) If an acquiring person is an individual, the acquiring person shall provide the personal unaudited financial information required by the commissioner.
(d) If an acquiring person is an insurer authorized to engage in the business of insurance in this state and actively engaging in the business of insurance, the acquiring person may provide financial statements that conform to the requirements of:
(1) the annual statements of the insurer filed with the insurance department of the insurer's state of domicile; and
(2) insurance or other accounting principles prescribed by or authorized under the law and regulations of the state of domicile.
(e) The commissioner may waive any financial information required under this section that the commissioner does not consider to be material. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.204. PLAN FOR FUTURE OF INSURER. A statement required under Section 823.154 must contain:
(1) any plan or proposal of the acquiring person to:
(A) cause the insurer to pay dividends or make distributions;
(B) liquidate the insurer;
(C) sell any of the insurer's assets;
(D) merge or consolidate the insurer with any person;
(E) make any other material change in the insurer's business or corporate structure or management; or
(F) cause the insurer to enter into material agreements, arrangements, or transactions of any kind with any person; and
(2) any oral or written arrangement or agreement between the acquiring person or an affiliate of the acquiring person and the domestic insurer entered into during the 12 months preceding the date of the statement. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.205. VOTING SECURITIES. (a) In this section, "voting security" means a voting security of a domestic insurer the acquisition of which requires the filing of a statement under Section 823.154 as a condition precedent.
(b) A statement required under Section 823.154 must contain:
(1) the number of shares of a voting security that the acquiring person or an affiliate of the acquiring person proposes to acquire and the terms of the acquisition;
(2) the amount of each class of a voting security that is beneficially owned by the acquiring person and by each affiliate of the acquiring person;
(3) the amount of each class of a voting security the beneficial ownership of which the acquiring person or an affiliate of the acquiring person has a right to acquire;
(4) a copy of any written or confirmed description of any oral agreement, arrangement, or understanding relating to a voting security and in which the acquiring person or an affiliate of the acquiring person is involved, including an agreement, arrangement, or understanding relating to the transfer of any of the voting securities, joint ventures, loan or option agreements, puts or calls, guarantees of loans, guarantees against loss, guarantees of profits, division of losses or profits, or the giving or withholding of proxies;
(5) a description of each purchase of a voting security, including the date of purchase, name of the purchaser, and consideration for the purchase, made during the 12 calendar months preceding the date of the filing of the statement by:
(A) the acquiring person; or
(B) an affiliate, director, or executive officer of the acquiring person;
(6) a copy of any written, or a confirmed description of any oral, recommendation to purchase a voting security made during the 12 calendar months preceding the date of the filing of the statement by:
(A) the acquiring person;
(B) an affiliate of the acquiring person; or
(C) a person based on an interview with, or at the suggestion of, the acquiring person or an affiliate of the acquiring person;
(7) a copy of each tender offer for, request or invitation for tender of, exchange offer for, or agreement to acquire or exchange a voting security and any additional distributed soliciting material relating to that offer, request, invitation, or agreement;
(8) a copy of any written, or a confirmed description of any oral, agreement, arrangement, or understanding made with a broker-dealer relating to the solicitation of a voting security for tender, and the amount of any compensation, including fees and commissions, to be paid to a broker-dealer with regard to the solicitation; and
(9) any additional information the commissioner by rule prescribes as necessary or appropriate to protect:
(A) policyholders of the insurer whose voting securities are to be acquired; or
(B) the public. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.206. ADDITIONAL INFORMATION ABOUT ACQUIRING ORGANIZATION. (a) If the person required to file the statement under Section 823.154 is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information required for an individual under this subchapter be given with respect to:
(1) each person who is a partner of the partnership or limited partnership or a member of the syndicate or group; and
(2) each person who controls a person described by Subdivision (1).
(b) If the person required to file the statement under Section 823.154 or the person with respect to whom information is required under Subsection (a) is a corporation, the commissioner may require that:
(1) the information required under this subchapter be given with respect to that corporation; and
(2) the information required for an individual under this subchapter be given with respect to:
(A) each executive officer and director of that corporation; and
(B) each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of that corporation. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
Sec. 823.207. OATH OR AFFIRMATION REQUIRED. A statement required under Section 823.154 must be made under oath or affirmation. (V.T.I.C. Art. 21.49-1, Sec. 5(b) (part).)
[Sections 823.208-823.250 reserved for expansion]
SUBCHAPTER F. INSURER'S LOANS TO OR
INVESTMENT IN AFFILIATE
Sec. 823.251. DEFINITION. In this subchapter, "securities" includes common stock, preferred stock, and debt obligations. (New.)
Sec. 823.252. GENERAL AUTHORITY RELATING TO AFFILIATES. A domestic insurer, by itself or in cooperation with one or more other persons, may organize, acquire, invest in, or make loans to one or more subsidiaries, and may loan to or invest in affiliates, as permitted by the provisions of this code governing investments. (V.T.I.C. Art. 21.49-1, Sec. 6(a).)
Sec. 823.253. GENERAL STANDARD FOR INVESTMENT IN AFFILIATE. (a) A domestic insurer may invest in the securities of one or more of the insurer's affiliates organized for any lawful purpose if:
(1) the amounts invested under this subsection in the aggregate do not exceed the lesser of:
(A) 10 percent of the insurer's assets; or
(B) 50 percent of the insurer's policyholders' surplus; and
(2) after investment under this subsection, the insurer's policyholders' surplus is reasonable in relation to the insurer's outstanding liabilities and adequate to the insurer's financial needs.
(b) For purposes of computing the amount of the investments under this section:
(1) investments in domestic or foreign insurance subsidiaries are excluded; and
(2) the following amounts are included:
(A) the total net amount spent and the amount of obligations assumed to acquire or form a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary regardless of whether represented by the purchase of capital stock or issuance of other securities; and
(B) all amounts spent to acquire additional securities and all contributions to the capital or surplus of a subsidiary made after the acquisition or formation of the subsidiary. (V.T.I.C. Art. 21.49-1, Sec. 6(b) (part).)
Sec. 823.254. STANDARD FOR INVESTMENT IN AFFILIATE BY INSURER WITH LOW TOTAL LIABILITIES. If a domestic insurer's total liabilities, as computed for National Association of Insurance Commissioners annual statement purposes, are less than 10 percent of the insurer's assets, the insurer may invest any amount in the securities of one or more affiliates organized for any lawful purpose if after the investment, treating the investment as if it were a nonadmitted asset, the insurer's policyholders' surplus is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (V.T.I.C. Art. 21.49-1, Sec. 6(b) (part).)
Sec. 823.255. AGREEMENT OF AFFILIATE TO LIMIT CERTAIN INVESTMENTS. (a) A domestic insurer may invest any amount in the securities of one or more affiliates organized for any lawful purpose if each affiliate agrees to limit its investments in any particular asset so that the investments will not cause the amount of the total investment of the insurer to exceed the amount the insurer could have directly invested in that asset.
(b) To compute the amount of the total investment of an insurer in an asset for purposes of Subsection (a), the following amounts are included:
(1) any direct investment by the insurer in that asset; and
(2) the insurer's proportionate share of investment in that asset by any affiliate of the insurer.
(c) To compute the insurer's proportionate share of investment under Subsection (b)(2), the amount of the affiliate's investment in the asset is multiplied by the percentage of the insurer's ownership of that affiliate. (V.T.I.C. Art. 21.49-1, Sec. 6(b) (part).)
Sec. 823.256. COMMISSIONER'S APPROVAL OF INVESTMENT. With the prior approval of the commissioner, a domestic insurer may invest any amount in the securities of one or more affiliates if after the investment the insurer's policyholders' surplus is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (V.T.I.C. Art. 21.49-1, Sec. 6(b) (part).)
Sec. 823.257. DETERMINATION REQUIRED BEFORE INVESTMENT. (a) Whether an investment meets an applicable requirement of this subchapter shall be determined before the investment is made by applying that requirement as if the investment had been made.
(b) In making the determination under Subsection (a):
(1) the amount to be used for the total of previous investments in debt obligations is the principal balance outstanding on all of those obligations at the time of the determination;
(2) the amount to be used for previous investments in equity securities is the sum of values of each previous investment as of the day the previous investment was made; and
(3) any return of capital invested, not including dividends, shall be subtracted. (V.T.I.C. Art. 21.49-1, Sec. 6(d).)
Sec. 823.258. DISPOSITION OF INVESTMENT IN SUBSIDIARY AFTER CESSATION OF CONTROL. (a) An insurer that ceases to control a subsidiary shall dispose of any investment in the subsidiary made under this subchapter before the third anniversary of the date the insurer ceases to control the subsidiary, unless:
(1) at any time after the investment is made the investment qualifies for investment under another provision of this code; and
(2) the insurer notifies the commissioner of that qualification.
(b) The commissioner may extend the period under Subsection (a) during which disposition is required. (V.T.I.C. Art. 21.49-1, Sec. 6(e).)
Sec. 823.259. EXEMPTION FROM CERTAIN LIMITATIONS; INVESTMENT AUTHORITY CUMULATIVE OF OTHER LAW. (a) An investment made under this subchapter is not subject to the restrictions and prohibitions relating to investments contained in this code other than those provided by Subchapter C.
(b) Investments authorized by this subchapter are in addition to other investments permitted under this code for a domestic insurer. (V.T.I.C. Art. 21.49-1, Secs. 6(b) (part), (c).)
[Sections 823.260-823.300 reserved for expansion]
SUBCHAPTER G. VALUATION OF INVESTMENT FOR FINANCIAL STATEMENT
Sec. 823.301. SCOPE OF SUBCHAPTER. (a) This subchapter applies only to the determination of the valuation for a financial statement of an investment by an insurer in an affiliate that is not an insurer.
(b) This subchapter does not apply for determining the amount invested under Section 823.253. (V.T.I.C. Art. 21.49-1, Sec. 6A(a) (part).)
Sec. 823.302. BASES FOR DETERMINING VALUATION. Subject to this subchapter, the valuation of an investment to which this subchapter applies is the greater of:
(1) the net shareholder equity value that the insurer owns in the affiliate adjusted, if the affiliate is a subsidiary, to include the value of only those assets of the subsidiary that would constitute lawful investments for the insurer if the assets were acquired or held directly by the insurer; or
(2) the amount determined using one of the following methods that is applicable for the affiliate in which the investment is made:
(A) the net worth of the affiliate determined at the end of the affiliate's most recent fiscal year in accordance with generally accepted accounting principles and reported in the financial statements of the affiliate for that fiscal year that were audited by an independent certified public accountant in accordance with generally accepted auditing standards;
(B) the value equal to the cost of the stock of the affiliate, determined and adjusted to reflect subsequent operating results in accordance with generally accepted accounting principles;
(C) the market value of the stock of the affiliate, if the stock is listed on a national securities exchange;
(D) the value, if any, placed on the stock of the affiliate by the National Association of Insurance Commissioners; or
(E) an amount that the insurer can substantiate to the satisfaction of the commissioner as being a reasonable value of that investment. (V.T.I.C. Art. 21.49-1, Sec. 6A(a) (part).)
Sec. 823.303. ADJUSTMENT TO DETERMINATION. If an affiliate is valued using a method other than the method provided by Section 823.302(2)(C), the valuation of the investment is computed by subtracting from the determined value an amount equal to the value claimed for any of the affiliate's assets that would not be admitted assets for the insurer if held directly by the insurer and that:
(1) are held by the affiliate but are used, including use under a lease agreement, significantly in the conduct of the insurer's business; or
(2) were acquired from or purchased for the benefit or use of the insurer by the affiliate under specific circumstances that, in the commissioner's opinion, support a reasonable finding that the primary purpose of the acquisition or purchase was to evade or avoid application of this code. (V.T.I.C. Art. 21.49-1, Sec. 6A(e).)
Sec. 823.304. USE OF DIFFERENT BASES. An insurer is not required to value the stock of all of its affiliates on the same basis. (V.T.I.C. Art. 21.49-1, Sec. 6A(a) (part).)
Sec. 823.305. VALUATING ACQUIRED AFFILIATE. (a) Not later than the 30th day after the date an insurer acquires an affiliate that is not an insurer, the insurer shall file with the commissioner relevant information identifying, supporting, and justifying the value of the affiliate and the basis of valuation under Section 823.302 used for that affiliate.
(b) After filing the information under Subsection (a), the insurer shall use the specified basis of valuation for that affiliate unless a change is substantiated as reasonable to and is approved in writing by the commissioner. (V.T.I.C. Art. 21.49-1, Secs. 6A(b), (c).)
Sec. 823.306. USE OF UNAUDITED INFORMATION. If an affiliate is valued using the basis provided by Section 823.302(2)(A) and the books of the affiliate are not audited at the time the valuation is included in the insurer's annual statement, the insurer, as soon as possible after an audit of those books, shall report and explain any difference between the value of the affiliate reported in the insurer's annual statement and the value determined by the audit. (V.T.I.C. Art. 21.49-1, Sec. 6A(d).)
Sec. 823.307. MODIFICATION BY COMMISSIONER. After notice and opportunity for a hearing, the commissioner may:
(1) determine that the basis used for valuation of the stock of an affiliate does not, under the specific circumstances, reflect the value of the affiliate; and
(2) order an adjustment in the valuation or the use of another basis of valuation provided by this subchapter. (V.T.I.C. Art. 21.49-1, Sec. 6A(f).)
[Sections 823.308-823.350 reserved for expansion]
SUBCHAPTER H. EXAMINATIONS
Sec. 823.351. EXAMINATION OF INSURER. (a) Subject to Section 823.352, the commissioner may order an insurer registered under Subchapter B to produce records, books, or other information papers in the possession of the insurer or an affiliate of the insurer that are necessary to ascertain the financial condition or legality of conduct of the insurer.
(b) If an insurer fails to comply with an order under Subsection (a), the commissioner by order may require the examination of each holding company of the insurer and each controlled person or affiliate in the insurer's insurance holding company system if the commissioner has cause to believe that:
(1) the operations of that person may materially affect the operations, management, or financial condition of any controlled insurer in that system; and
(2) the commissioner is unable to obtain relevant information from the controlled insurer.
(c) The commissioner shall specify in an order under Subsection (b) the grounds for the examination. An examination under Subsection (b) shall be confined to matters specified in the order.
(d) Only the person sought to be examined under Subsection (b) is entitled to seek judicial review of an order under that subsection. (V.T.I.C. Art. 21.49-1, Sec. 9(a) (part).)
Sec. 823.352. LIMITATION ON POWER. The commissioner may exercise power under Section 823.351 only if:
(1) examination of the insurer under another provision of this code is inadequate; or
(2) the interests of the insurer's policyholders may be adversely affected. (V.T.I.C. Art. 21.49-1, Sec. 9(b).)
Sec. 823.353. PAYMENT OF EXAMINATION COSTS. (a) Each registered insurer that complies with an order under Section 823.351(a) shall pay the expense of the examination in accordance with Article 1.16.
(b) The commissioner shall assess the cost of an examination under Section 823.351(b) against the person examined. The controlled insurer may not directly or indirectly reimburse that person for any part of the cost. (V.T.I.C. Art. 21.49-1, Secs. 9(a) (part), (d).)
Sec. 823.354. USE OF ADVISORS. (a) The commissioner may employ at the registered insurer's expense attorneys, actuaries, accountants, and other experts that are not a part of the commissioner's staff and that are reasonably necessary to assist in the conduct of an examination under Section 823.351.
(b) A person employed under this section is under the direction and control of the commissioner and may act only as an advisor. (V.T.I.C. Art. 21.49-1, Sec. 9(c).)
Sec. 823.355. CUMULATIVE AUTHORITY. The authority provided by this subchapter is in addition to other powers relating to the examination of insurers given to the commissioner under this code. (V.T.I.C. Art. 21.49-1, Sec. 9(a) (part).)
[Sections 823.356-823.400 reserved for expansion]
SUBCHAPTER I. LIMITATIONS RELATING TO CONTROLLED INSURERS
Sec. 823.401. PROHIBITION OF INDIRECT ACTION FOR CONTROLLED INSURER. (a) A holding company or controlled person may not directly or indirectly do or cause to be done for or on behalf of a controlled insurer any act intended to affect, influence, change, or alter the insurance operations of the insurer that would violate this code if done by the insurer alone.
(b) This section does not limit or prohibit a holding company or a person in the insurance holding company system from conducting on behalf of the person any type of business that would be normal and natural to the person if the person were not in the holding company system. (V.T.I.C. Art. 21.49-1, Sec. 8.)
Sec. 823.402. PROHIBITION ON VOTING CERTAIN SECURITIES. (a) A security that is the subject of an agreement or arrangement regarding an acquisition or that is acquired or to be acquired in violation of this chapter or a rule or order under this chapter may not be voted at a shareholders' meeting or counted for quorum purposes. An action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though the security was not outstanding.
(b) An action taken at a shareholders' meeting is not invalidated by the voting of a security to which Subsection (a) applies unless:
(1) the action would materially affect control of the insurer; or
(2) a court of this state invalidates the action. (V.T.I.C. Art. 21.49-1, Sec. 12(b) (part).)
Sec. 823.403. MANAGEMENT OF CONTROLLED INSURER. (a) The control of an authorized insurer by another person does not relieve an officer or director of the insurer of any obligation or liability to which the officer or director is subject by law. The insurer shall be managed to assure the insurer's separate operating identity consistent with this code.
(b) This section does not preclude an authorized insurer from having a common management or joint use of personnel, property, or services with one or more other persons under an arrangement that meets the standards of Section 823.101(e). (V.T.I.C. Art. 21.49-1, Sec. 7.)
[Sections 823.404-823.450 reserved for expansion]
SUBCHAPTER J. CIVIL REMEDIES AND SANCTIONS
Sec. 823.451. RECEIVERSHIP. If it appears to the commissioner that a person's violation of this chapter so impairs the financial condition of a domestic insurer as to threaten the insurer's insolvency or make the further transaction of the insurer's business hazardous to the insurer's policyholders or creditors or the public, the commissioner may proceed under Articles 21.28 and 21.28-A to take possession of the insurer's property and conduct the business of the insurer. (V.T.I.C. Art. 21.49-1, Sec. 14.)
Sec. 823.452. REVOCATION, SUSPENSION, OR NONRENEWAL OF INSURER'S AUTHORITY. (a) If it appears to the commissioner that a person's violation of this chapter makes the continued operation of an insurer contrary to the interest of policyholders or the public, the commissioner, after notice and opportunity for a hearing, may suspend, revoke, or refuse to renew the insurer's certificate of authority to engage in the business of insurance in this state for the period the commissioner finds is required for the protection of policyholders or the public.
(b) The commissioner shall provide specific findings of fact and conclusions of law to accompany a determination under this section. (V.T.I.C. Art. 21.49-1, Sec. 15.)
Sec. 823.453. VOIDING UNAUTHORIZED ACTION. If it appears to the commissioner that a person has entered into a transaction or performed an act before complying with the applicable provisions of this chapter or has obtained the commissioner's approval of or acquiescence in a transaction or act that is subject to this chapter based on a material fraudulent misrepresentation, misstatement, or omission, the commissioner, after notice and opportunity for a hearing, by order may void the transaction or act and return the parties to the position they would have occupied if the transaction or act had not occurred. (V.T.I.C. Art. 21.49-1, Sec. 16.)
Sec. 823.454. ADMINISTRATIVE PENALTY. (a) A director or officer of an insurer or insurance holding company system that is subject to this chapter is subject to an administrative penalty under Chapter 84 if the director or officer knowingly and wilfully:
(1) participates in or assents to a transaction or an investment that has not been properly reported or submitted under this chapter;
(2) permits an officer, agent, or employee of the insurer or holding company system, as appropriate, to engage in a transaction or make an investment that has not been properly reported or submitted under this chapter; or
(3) violates this chapter.
(b) The amount of an administrative penalty under this section may not exceed $10,000 for each violation. (V.T.I.C. Art. 21.49-1, Sec. 5(k).)
Sec. 823.455. EQUITABLE RELIEF. (a) If it appears to the commissioner that an insurer or a director, officer, employee, or agent of an insurer has committed or is about to commit a violation of this chapter or a rule or order under this chapter, the commissioner may apply to a district court of Travis County for an order enjoining the violation and for other equitable relief that the nature of the case and the interest of the insurer's policyholders or creditors or the public requires.
(b) If an insurer or the commissioner has reason to believe that a security of the insurer was or is about to be acquired in violation of this chapter or a rule or order under this chapter, the insurer or the commissioner may apply to a district court of Travis County or of the county in which the insurer has its principal place of business to:
(1) enjoin any offer, request, invitation, agreement, or acquisition made in violation of Subchapter D or a rule or order under that subchapter;
(2) enjoin the voting of a security acquired in violation of Subchapter D or a rule or order under that subchapter; or
(3) void a vote of the security that was cast at any shareholders' meeting.
(c) In a suit filed under Subsection (b), the insurer or the commissioner may also apply for other equitable relief that the nature of the case and the interests of the insurer's policyholders or creditors or the public requires. (V.T.I.C. Art. 21.49-1, Secs. 12(a), (b) (part).)
Sec. 823.456. SEIZURE OR SEQUESTRATION OF VOTING SECURITIES. If a person acquires or is proposing to acquire a voting security in violation of this chapter or a rule or order under this chapter, a district court of Travis County or of the county in which the insurer has its principal place of business, on application of the insurer or the commissioner and notice that the court considers appropriate, may seize or sequester any voting securities of the insurer that are owned directly or indirectly by that person and may issue an order relating to those securities that is appropriate to implement this chapter. (V.T.I.C. Art. 21.49-1, Sec. 12(c) (part).)
Sec. 823.457. LONG ARM JURISDICTION; SERVICE OF PROCESS. (a) The courts of this state have jurisdiction over a person who is not a resident of, domiciled in, or authorized to engage in business in this state and files a statement with the commissioner under Subchapter D, and over the actions involving that person that arise out of a violation of this chapter.
(b) A person described by Subsection (a) is considered to have appointed the commissioner as the person's agent for service of process in any action, suit, or proceeding arising out of a violation of this chapter.
(c) The commissioner shall forward by registered or certified mail to the person's last known address copies of all processes that are served on the commissioner under Subsection (b).
(d) Additional procedures and fees for service of process are provided by Subchapter C, Chapter 804. (V.T.I.C. Art. 1.36, Sec. 7(e); Art. 21.49-1, Sec. 5(i).)
Sec. 823.458. SANCTIONS. An entity that holds a certificate of authority issued by the department and that violates this code is subject to sanctions under Chapter 82. (V.T.I.C. Art. 21.49-1, Sec. 5(j).)
[Sections 823.459-823.500 reserved for expansion]
SUBCHAPTER K. CRIMINAL PENALTIES
Sec. 823.501. OFFENSE OF VIOLATING CHAPTER. (a) A person commits an offense if the person is an insurer or individual and wilfully violates this chapter.
(b) If the person is an insurer, an offense under Subsection (a) is a misdemeanor punishable by a fine not to exceed $50,000 for each violation.
(c) If the person is an individual, an offense under Subsection (a) is a misdemeanor punishable by a fine not to exceed $10,000 for each violation except as provided by Subsection (d) and Section 823.502.
(d) An offense under Subsection (a) is a felony if the person is an individual and the violation involves the deliberate perpetration of a fraud on the department, an insurer, an insurer's subsidiary, or policyholders. The felony is punishable by:
(1) imprisonment for a term not to exceed five years;
(2) a fine not to exceed $10,000 for each violation; or
(3) both fine and imprisonment under this subsection.
(e) A fine under this section is in addition to any civil or administrative penalty.
(f) An individual on whom a fine is imposed under this section shall pay the fine in that person's individual capacity. (V.T.I.C. Art. 21.49-1, Sec. 13(a) (part).)
Sec. 823.502. OFFENSE OF SUBSCRIBING TO OR MAKING FALSE STATEMENT. (a) A person commits an offense if the person is an officer, director, or employee of a domestic insurer or the insurer's insurance holding company system and wilfully and knowingly subscribes to or makes or causes to be made a false statement on a written instrument required to be filed with the commissioner.
(b) An offense under Subsection (a) is a felony punishable by:
(1) imprisonment for a term of not less than two years;
(2) a fine not to exceed $10,000 for each violation; or
(3) both fine and imprisonment under this subsection.
(c) A person on whom a fine is imposed under this section shall pay the fine in that person's individual capacity. (V.T.I.C. Art. 21.49-1, Sec. 13(b).)
Sec. 823.503. BEGINNING CRIMINAL PROCEEDINGS. If it appears to the commissioner that an insurer or a director, officer, employee, or agent of an insurer has wilfully violated this chapter, the commissioner may cause criminal proceedings to be instituted against that person by the district attorney for the county in which the principal office of the insurer is located or, if the insurer does not have a principal office in this state, the district attorney of Travis County. (V.T.I.C. Art. 21.49-1, Sec. 13(a) (part).)
CHAPTER 824. MERGER AND CONSOLIDATION OF INSURANCE CORPORATIONS
SUBCHAPTER A. AUTHORITY AND PROCEDURES
Sec. 824.001. AUTHORITY TO MERGE OR CONSOLIDATE
Sec. 824.002. PROCEDURES; APPLICABILITY OF TEXAS BUSINESS
CORPORATION ACT
Sec. 824.003. PROPOSED PLAN OF MERGER OR CONSOLIDATION;
APPROVAL OF DIRECTORS AND SHAREHOLDERS
Sec. 824.004. FILING OF PROPOSED PLAN WITH COMMISSIONER
Sec. 824.005. COMMISSIONER ACTION ON PLAN
[Sections 824.006-824.050 reserved for expansion]
SUBCHAPTER B. EFFECTIVE DATE OF MERGER OR CONSOLIDATION
Sec. 824.051. EFFECTIVE DATE OF MERGER
Sec. 824.052. EFFECTIVE DATE OF CONSOLIDATION
Sec. 824.053. APPROVAL OF MERGER OR CONSOLIDATION AFFECTING
FOREIGN CORPORATION; EFFECTIVE DATE
[Sections 824.054-824.100 reserved for expansion]
SUBCHAPTER C. EFFECT OF MERGER OR CONSOLIDATION
Sec. 824.101. EFFECT OF MERGER OR CONSOLIDATION ON
OUTSTANDING INSURANCE POLICIES
Sec. 824.102. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN
INVESTMENTS
Sec. 824.103. RETIREMENT AND CANCELLATION OF TREASURY SHARES
Sec. 824.104. EFFECT ON ANTITRUST LAWS
[Sections 824.105-824.150 reserved for expansion]
SUBCHAPTER D. MERGER OR CONSOLIDATION OF LIFE INSURANCE
CORPORATIONS
Sec. 824.151. PURCHASE OF OUTSTANDING SHARES BY LIFE
INSURANCE CORPORATION
Sec. 824.152. LIMITATIONS ON PURCHASE OF OUTSTANDING SHARES BY
LIFE INSURANCE CORPORATION
CHAPTER 824. MERGER AND CONSOLIDATION OF INSURANCE CORPORATIONS
SUBCHAPTER A. AUTHORITY AND PROCEDURES
Sec. 824.001. AUTHORITY TO MERGE OR CONSOLIDATE. Two or more insurance corporations that engage in a similar line of the business of insurance may merge or consolidate under this chapter. (V.T.I.C. Art. 21.25, Sec. 1 (part).)
Sec. 824.002. PROCEDURES; APPLICABILITY OF TEXAS BUSINESS CORPORATION ACT. (a) To the extent that the provisions of the Texas Business Corporation Act are not inconsistent with the provisions of this code, the Texas Business Corporation Act governs:
(1) the procedures for a merger or consolidation under this chapter;
(2) the effect of a merger or consolidation under this chapter; and
(3) the rights and duties of creditors, shareholders, and the corporations that are involved in a merger or consolidation under this chapter.
(b) To the extent that the Texas Business Corporation Act applies under this chapter to insurance corporations, the commissioner shall perform each duty, exercise each power, and perform each act vested in, required of, or to be performed by the secretary of state under the Texas Business Corporation Act. (V.T.I.C. Art. 21.25, Sec. 1 (part).)
Sec. 824.003. PROPOSED PLAN OF MERGER OR CONSOLIDATION; APPROVAL OF DIRECTORS AND SHAREHOLDERS. (a) A proposed plan of merger or consolidation must be approved by the boards of directors of the corporations that are parties to the merger or consolidation.
(b) After approval by the boards of directors, the proposed plan shall be submitted for approval to the shareholders of each corporation that is a party to the plan at a separate regular or special meeting of the shareholders called in the manner provided by the bylaws of the respective corporations.
(c) A plan is approved on the affirmative vote of the holders of two-thirds of the shares of the capital stock of each corporation that is a party to the plan. (V.T.I.C. Art. 21.25, Sec. 2.)
Sec. 824.004. FILING OF PROPOSED PLAN WITH COMMISSIONER. After a proposed plan of merger or consolidation has been approved as provided by Section 824.003, the plan shall be filed with the commissioner. (V.T.I.C. Art. 21.25, Sec. 3 (part).)
Sec. 824.005. COMMISSIONER ACTION ON PLAN. (a) The commissioner shall hold a hearing on a proposed plan of merger or consolidation not later than the 15th day after the date on which the plan is filed with the commissioner as required by Section 824.004.
(b) Not later than the 15th day after the hearing date, the commissioner shall:
(1) give written approval of the plan to each insurance corporation that is a party to the proposed merger or consolidation; or
(2) disapprove the plan if the commissioner determines that the plan:
(A) is contrary to law; or
(B) would not be in the best interests of the policyholders affected by the plan and would substantially reduce the security of and service to be rendered to policyholders of the insurance corporation in this state or elsewhere.
(c) The commissioner may extend the period during which the commissioner may affirmatively approve or disapprove the proposed plan if representatives of the applicants for the proposed merger or consolidation concur in that extension.
(d) If the commissioner disapproves a proposed plan, the commissioner shall specify in detail the reasons for that disapproval. (V.T.I.C. Art. 21.25, Sec. 3 (part).)
[Sections 824.006-824.050 reserved for expansion]
SUBCHAPTER B. EFFECTIVE DATE OF MERGER OR CONSOLIDATION
Sec. 824.051. EFFECTIVE DATE OF MERGER. A merger takes effect on the date specified in the proposed plan of merger. (V.T.I.C. Art. 21.25, Sec. 3 (part).)
Sec. 824.052. EFFECTIVE DATE OF CONSOLIDATION. (a) A new insurance corporation resulting from a plan of consolidation shall be issued a charter and a certificate of authority on:
(1) submission of proper articles of incorporation to the commissioner;
(2) approval by the commissioner in accordance with the procedures required for the issuance of a new charter; and
(3) submission of proof that the new corporation has capital and surplus at least equal to that of the corporation that is a party to the consolidation and has the largest capital and surplus.
(b) A consolidation takes effect on the date of issuance of the charter and certificate of authority under Subsection (a). (V.T.I.C. Art. 21.25, Sec. 3 (part).)
Sec. 824.053. APPROVAL OF MERGER OR CONSOLIDATION AFFECTING FOREIGN CORPORATION; EFFECTIVE DATE. Notwithstanding Section 824.051 or 824.052, a merger or consolidation involving a corporation organized under the laws of another state does not take effect until the merger or consolidation is approved by the proper official of the domiciliary state, if that approval is required. (V.T.I.C. Art. 21.25, Sec. 3 (part).)
[Sections 824.054-824.100 reserved for expansion]
SUBCHAPTER C. EFFECT OF MERGER OR CONSOLIDATION
Sec. 824.101. EFFECT OF MERGER OR CONSOLIDATION ON OUTSTANDING INSURANCE POLICIES. (a) A new or surviving corporation resulting from a merger or consolidation shall assume each insurance policy outstanding against each insurance corporation that merges or consolidates on the same terms and under the same conditions as if the policy had continued in force through the original corporation.
(b) The new or surviving insurance corporation shall implement the terms of the policy.
(c) The new or surviving insurance corporation is entitled to:
(1) all rights and privileges under the policy; and
(2) all reserves that accumulated on the policy before the merger or consolidation. (V.T.I.C. Art. 21.25, Sec. 4.)
Sec. 824.102. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN INVESTMENTS. (a) This section applies to each investment of an affected corporation, including an investment in real property, that:
(1) was authorized as a proper asset, as of the date on which the investment was made and under the laws of the state in which the insurance corporation was organized, for investment of funds of an insurance corporation; and
(2) is taken over by the new or surviving corporation under the terms of the merger or consolidation.
(b) On the merger or consolidation of two or more insurance corporations under this chapter, an investment of the affected corporations described by Subsection (a) is a proper asset under the laws of this state of the new or surviving corporation if the investment is:
(1) approved by the commissioner; and
(2) taken over on terms satisfactory to the commissioner.
(c) A new or surviving corporation that acquires, under the terms of the merger or consolidation, real property that exceeds the amount of real property permitted by the applicable sections of this code relating to owning or holding real property must sell and dispose of the excess real property:
(1) within the period specified by those sections; or
(2) within a longer period if the corporation obtains a certificate from the commissioner:
(A) stating that the interests of the corporation will materially suffer by the forced sale of the affected real property; and
(B) specifying the longer period for the sale of the excess real property.
(d) This section does not preclude the designation and use of the acquired excess real property as branch offices in accordance with this code. (V.T.I.C. Art. 21.25, Sec. 5.)
Sec. 824.103. RETIREMENT AND CANCELLATION OF TREASURY SHARES. (a) After a merger or consolidation is completed, any shares of the new or surviving corporation acquired by that corporation as a result of distribution of shares to the shareholders of another corporation that is merged or consolidated or as a result of purchase of shares of dissenting shareholders, may be held as treasury shares until the first anniversary of the date on which the merger or consolidation takes effect.
(b) After the period during which shares described by Subsection (a) are held as treasury shares, the corporation shall retire and cancel those shares by proper amendments to its charter if the shares have not previously been reissued. (V.T.I.C. Art. 21.25, Sec. 6.)
Sec. 824.104. EFFECT ON ANTITRUST LAWS. This chapter does not affect in any manner the antitrust laws of this state. (V.T.I.C. Art. 21.25, Sec. 8.)
[Sections 824.105-824.150 reserved for expansion]
SUBCHAPTER D. MERGER OR CONSOLIDATION OF LIFE INSURANCE
CORPORATIONS
Sec. 824.151. PURCHASE OF OUTSTANDING SHARES BY LIFE INSURANCE CORPORATION. (a) A life insurance corporation may purchase or contract to purchase all or part of the outstanding shares of another life insurance corporation for purposes of merger or consolidation.
(b) Except as provided by Section 824.152, the provisions of Article 3.39 that limit investments in the corporate stock of another corporation do not apply to a purchase made under this section. (V.T.I.C. Art. 21.25, Sec. 7 (part).)
Sec. 824.152. LIMITATIONS ON PURCHASE OF OUTSTANDING SHARES BY LIFE INSURANCE CORPORATION. (a) A purchase or contract to purchase under Section 824.151 is subject to this section.
(b) The intention to merge or consolidate must be evidenced by a resolution adopted by the board of directors of the purchasing corporation on or before the purchase of the shares or the execution of a contract to purchase the shares.
(c) The purchasing corporation shall obtain or seek to obtain at least the number of shares of the other insurance corporation necessary to vote an approval of the merger or consolidation under the laws of the state in which the other insurance corporation is organized, by one or more of the following means:
(1) initially purchasing or contracting to purchase the shares; or
(2) offering to purchase, making a tender offer for, requesting or inviting tenders of, or otherwise seeking to acquire the shares in the open market or otherwise.
(d) A purchase, offer to purchase, tender offer, request to purchase, or invitation to purchase shares in excess of the limits imposed under Article 3.39 may not be made until it is filed with and approved by the commissioner in accordance with Chapter 823.
(e) Following the earlier of the date of the contract to purchase the shares or the date of the commissioner's approval of the purchase, offer to purchase, tender offer, or request or an invitation to purchase the shares, the corporation the shares of which are being purchased may not purchase or contract to purchase any of its own shares as treasury shares, issue or contract to issue any of its authorized but unissued shares, or make any investments in or loans to the purchasing corporation or any of its affiliates unless the investment or loan is otherwise authorized and approved in advance by the commissioner under Chapter 823.
(f) The merger or consolidation must take effect on or before December 31 of the second year after the earlier of the year in which the initial purchase of the shares is made or the year in which the initial contract to purchase is executed unless the commissioner for good cause shown extends that period.
(g) If the merger or consolidation does not take effect within the period finally determined and extended by the commissioner, the purchasing corporation must sell or otherwise dispose of the purchased shares that exceed the investment limitations imposed under Article 3.39 within six months of the final effective date.
(h) Amounts actually paid by the purchasing corporation for the purchase of shares acquired or obtained under this subchapter may not include the minimum capital, minimum surplus, and policy reserves required by law for the purchasing corporation. (V.T.I.C. Art. 21.25, Sec. 7 (part).)
CHAPTER 825. CONVERSION OF STOCK INSURANCE COMPANY
TO MUTUAL INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 825.001. DEFINITIONS
Sec. 825.002. AUTHORITY TO CONVERT TO MUTUAL INSURANCE
COMPANY
[Sections 825.003-825.050 reserved for expansion]
SUBCHAPTER B. STOCK ACQUISITION PLAN
Sec. 825.051. CONTENTS OF STOCK ACQUISITION PLAN
Sec. 825.052. SUFFICIENT ASSETS REQUIRED
Sec. 825.053. STOCK ACQUISITION PLAN APPROVAL
Sec. 825.054. POLICYHOLDER ELIGIBILITY
Sec. 825.055. POLICYHOLDERS' MEETING
Sec. 825.056. POLICYHOLDER VOTING
[Sections 825.057-825.100 reserved for expansion]
SUBCHAPTER C. ACQUISITION OF SHARES
Sec. 825.101. ISSUANCE OF ANNUITY BONDS IN PAYMENT OF STOCK
Sec. 825.102. ACQUISITION IN TRUST
Sec. 825.103. DISTRIBUTION OF DIVIDENDS
Sec. 825.104. CONVERSION COMPLETE ON CANCELLATION OF STOCK;
APPLICATION OF CERTAIN LAWS
CHAPTER 825. CONVERSION OF STOCK INSURANCE COMPANY
TO MUTUAL INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 825.001. DEFINITIONS. In this chapter:
(1) "Converting company" means a stock insurance company that converts to a mutual insurance company under this chapter.
(2) "Resulting company" means a mutual insurance company to which a stock insurance company converts under this chapter.
(3) "Stock acquisition plan" means a converting company's plan for the acquisition of shares of its capital stock. (New.)
Sec. 825.002. AUTHORITY TO CONVERT TO MUTUAL INSURANCE COMPANY. (a) A domestic stock insurance company, as defined by law, may convert to a mutual insurance company.
(b) To convert to a mutual insurance company, a stock insurance company must implement a plan for the acquisition of shares of its capital stock.
(c) In implementing a stock acquisition plan under this chapter, a converting company may acquire shares of its stock by gift, bequest, or purchase. (V.T.I.C. Art. 21.27, Secs. 1 (part), 2 (part).)
[Sections 825.003-825.050 reserved for expansion]
SUBCHAPTER B. STOCK ACQUISITION PLAN
Sec. 825.051. CONTENTS OF STOCK ACQUISITION PLAN. (a) A stock acquisition plan must:
(1) be adopted by a vote of a majority of the directors of the corporation at a directors' meeting called for that purpose;
(2) be approved by a vote of shareholders representing a majority of the capital stock at a meeting of shareholders called for that purpose;
(3) enable each shareholder to dispose of the same proportion of the shareholder's holdings at the same price per share and on the same terms as any other shareholder;
(4) be approved by a vote of the majority of the policyholders eligible under Section 825.054 to participate at a meeting of the policyholders called for that purpose; and
(5) be submitted to the commissioner and approved by the commissioner in writing.
(b) If the purchase price for the company's acquisition of shares of its capital stock is not set by the stock acquisition plan, each payment for those shares is subject to the commissioner's approval. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
Sec. 825.052. SUFFICIENT ASSETS REQUIRED. The commissioner may not approve a stock acquisition plan or a payment for stock under Section 825.051(b) unless, at the time of the approval, the company has assets equal to at least $500,000 more than the entire liability of the company, including the net values of its outstanding contracts computed as required by law, and all funds and contingent reserves, after deducting:
(1) the aggregate amount allocated by the plan for the acquisition of any part or all of its capital stock, to be paid in cash or other assets of the company; and
(2) the amount of any payment not set by the plan and subject to separate approval by the commissioner after the approval of the plan. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
Sec. 825.053. STOCK ACQUISITION PLAN APPROVAL. A policyholders' meeting for approval of a stock acquisition plan may not be called until Sections 825.051(a)(1) and (2) are satisfied. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
Sec. 825.054. POLICYHOLDER ELIGIBILITY. To be eligible to participate in a policyholders' meeting held to approve a stock acquisition plan, a policyholder must have insurance coverage issued by the converting company that:
(1) is in the amount of at least $1,000;
(2) is in force on the date of the policyholders' meeting; and
(3) has been in force for at least one year before the date of the policyholders' meeting. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
Sec. 825.055. POLICYHOLDERS' MEETING. (a) A converting company shall give notice of the policyholders' meeting to each eligible policyholder.
(b) The notice must be mailed from the home office of the converting company not later than the 31st day before the scheduled date of the meeting in a sealed envelope, postage prepaid, to the policyholder at the policyholder's last known mailing address.
(c) The policyholders' meeting shall be conducted in the manner provided by the stock acquisition plan.
(d) The commissioner shall supervise and direct the procedure of the policyholders' meeting. The converting company shall pay all necessary expenses incurred by the commissioner as certified by the commissioner. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
Sec. 825.056. POLICYHOLDER VOTING. (a) A policyholder may vote in person, by proxy, or by mail. All votes must be cast by ballot.
(b) The commissioner shall appoint an adequate number of inspectors to conduct the voting at the policyholders' meeting.
(c) The inspectors determine all questions concerning the verification of the ballots, the validity of the ballots, the qualification of the voters, and the canvass of the vote and shall certify the results to the commissioner and the converting company.
(d) An inspector shall act under rules prescribed by the commissioner. (V.T.I.C. Art. 21.27, Sec. 1 (part).)
[Sections 825.057-825.100 reserved for expansion]
SUBCHAPTER C. ACQUISITION OF SHARES
Sec. 825.101. ISSUANCE OF ANNUITY BONDS IN PAYMENT OF STOCK. (a) A stock acquisition plan may provide that all or part of the purchase price of any part or all of the shares of stock of a converting company that are acquired by the company under the plan may be paid by the company through the issuance of annuity bonds payable in annual amounts and for the term provided by the plan.
(b) Each annuity bond issued under Subsection (a) must expressly provide, on the face of the bond, that the bond is payable only out of the surplus of the converting company remaining after all liabilities, including reserves, are provided for and is not otherwise a liability or claim against the converting company or any of its assets, as provided by Section 882.253.
(c) Not more than three-fourths of the net earnings of the converting company during any calendar year may be used or applied to the payment of the annuity bonds.
(d) On the approval of the commissioner, the company issuing the annuity bonds or any life insurance company may invest its funds in the annuity bonds. The investment in the annuity bonds may not at any time exceed 10 percent of the company's total admitted assets. (V.T.I.C. Art. 21.27, Sec. 3.)
Sec. 825.102. ACQUISITION IN TRUST. (a) Until all of the shares of a converting company are acquired, any shares acquired under the stock acquisition plan shall be held in trust for the policyholders of the converting company by three trustees appointed as provided by the stock acquisition plan.
(b) Each appointee must file with the converting company a verified acceptance of the appointment and a declaration that the appointee will faithfully discharge the appointee's duties.
(c) The shares shall be assigned and transferred on the books of the converting company to the trustees. The trustees shall vote the shares at each meeting at which shareholders are entitled to vote, until all the capital stock of the converting company is canceled under Section 825.104.
(d) After paying the necessary expenses of executing the trust, the trustees shall immediately pay all dividends and other amounts received on the shares of stock acquired under Section 825.101 to the converting company for the benefit of those who are or become policyholders of the resulting company entitled to participate in the profits of the resulting company.
(e) All amounts received by the converting company under Subsection (d) shall be added to the surplus earned by the resulting company and accordingly are apportionable as a part of the surplus among the resulting company's policyholders.
(f) A vacancy among the trustees shall be filled as provided by the stock acquisition plan. (V.T.I.C. Art. 21.27, Sec. 2 (part).)
Sec. 825.103. DISTRIBUTION OF DIVIDENDS. After conversion, the converting company shall annually distribute among its policyholders, under terms approved by the commissioner, dividends or earnings accruing to the converting company as the result of the acquisition of shares of the converting company's stock under this chapter. (V.T.I.C. Art. 21.27, Sec. 4.)
Sec. 825.104. CONVERSION COMPLETE ON CANCELLATION OF STOCK; APPLICATION OF CERTAIN LAWS. (a) When the converting company acquires all of its capital stock and the purchase price for that stock, including any annuity bond issued for the purchase of the stock, is paid in full, the stock shall be canceled.
(b) On cancellation of the stock, the converting company becomes a mutual insurance company without capital stock and is subject to the laws of this state governing mutual insurance companies. (V.T.I.C. Art. 21.27, Sec. 2 (part).)
CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY
TO STOCK INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 826.001. DEFINITIONS
Sec. 826.002. AUTHORITY TO CONVERT TO STOCK INSURANCE COMPANY
Sec. 826.003. RIGHTS AND PRIVILEGES OF RESULTING
COMPANY; LAWS APPLICABLE
Sec. 826.004. CERTAIN CONVERSIONS PROHIBITED
Sec. 826.005. CORPORATE EXISTENCE
[Sections 826.006-826.050 reserved for expansion]
SUBCHAPTER B. CONVERSION PLAN ADOPTION AND REQUIREMENTS
Sec. 826.051. PLAN ADOPTION
Sec. 826.052. GENERAL REQUIREMENTS; EFFECT OF
CONVERSION ON POLICIES
Sec. 826.053. SALE OF CAPITAL STOCK
Sec. 826.054. PURCHASE PRICE OF CAPITAL STOCK
Sec. 826.055. LIMITATION ON ACQUISITION OF CAPITAL STOCK
Sec. 826.056. DIRECTORS AND OFFICERS
Sec. 826.057. RIGHTS OF HOLDER OF SURPLUS NOTES
Sec. 826.058. SUBSCRIPTION RIGHTS; GENERAL PROVISIONS
Sec. 826.059. SUBSCRIPTION RIGHTS; TAX-QUALIFIED EMPLOYEE
BENEFIT PLAN
Sec. 826.060. LIQUIDATION ACCOUNT
Sec. 826.061. ALTERNATE CONVERSION PLAN
[Sections 826.062-826.100 reserved for expansion]
SUBCHAPTER C. ADOPTION OF CONVERSION PLAN
Sec. 826.101. PLAN INFORMATION FILED WITH COMMISSIONER;
COMMISSIONER POWERS AND DUTIES
Sec. 826.102. APPROVAL OF PLAN BY COMMISSIONER
Sec. 826.103. AMENDMENTS; WITHDRAWAL OF PLAN
Sec. 826.104. NOTICE TO ELIGIBLE MEMBERS; COMMENTS
Sec. 826.105. SUBSTANTIAL COMPLIANCE WITH NOTICE
REQUIREMENTS
Sec. 826.106. INSOLVENT CONVERTING COMPANY; NOTICE REQUIREMENTS
Sec. 826.107. ELECTION; APPROVAL OF PLAN; ADOPTION OF AMENDED
OR RESTATED ARTICLES OF INCORPORATION
Sec. 826.108. FILING OF MINUTES, ARTICLES OF INCORPORATION, AND
BYLAWS; EFFECTIVE DATE OF CONVERSION
Sec. 826.109. CONFLICT OF INTEREST
Sec. 826.110. LIMITATION ON ACTIONS
[Sections 826.111-826.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF MEMBERS ON CONVERSION
Sec. 826.151. RIGHTS OF MEMBERS WHOSE POLICIES ARE ISSUED
AFTER ADOPTION OF CONVERSION PLAN BUT BEFORE
EFFECTIVE DATE
Sec. 826.152. AMENDMENT OF POLICIES
[Sections 826.153-826.200 reserved for expansion]
SUBCHAPTER E. CONVERSION THROUGH MUTUAL HOLDING COMPANY
Sec. 826.201. CONVERSION THROUGH CREATION OF HOLDING COMPANY
Sec. 826.202. COMMISSIONER POWERS AND DUTIES; APPROVAL
Sec. 826.203. APPLICABILITY OF CERTAIN LAWS; INCORPORATION
Sec. 826.204. MEMBERSHIP INTERESTS
Sec. 826.205. CAPITAL STOCK HELD BY MUTUAL HOLDING COMPANY
Sec. 826.206. CONVERSION OF FOREIGN MUTUAL INSURANCE COMPANY
CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY
TO STOCK INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 826.001. DEFINITIONS. In this chapter:
(1) "Conversion plan" means a plan adopted under this chapter to convert a mutual insurance company into a stock insurance company.
(2) "Converting company" means a domestic mutual insurance company that is converting under this chapter into a domestic stock insurance company.
(3) "Eligible member" means a member of a converting company whose policy is in force on the date that the company's board of directors adopts a conversion plan. The term does not include a person insured under a group policy.
(4) "Mutual insurance company" means a domestic mutual insurance company.
(5) "Participating policy" means a policy issued by a mutual insurance company that grants a holder the right to receive declared dividends.
(6) "Resulting company" means a domestic stock insurance company that has converted under this chapter from a domestic mutual insurance company. (V.T.I.C. Art. 15.22, Secs. 1(1), (2), (3), (4), (5); New.)
Sec. 826.002. AUTHORITY TO CONVERT TO STOCK INSURANCE COMPANY. (a) A mutual insurance company may convert to a stock insurance company.
(b) A converting company may not engage in the business of insurance as a stock insurance company until it complies with the requirements of this chapter. (V.T.I.C. Art. 15.22, Sec. 2(a) (part); New.)
Sec. 826.003. RIGHTS AND PRIVILEGES OF RESULTING COMPANY; LAWS APPLICABLE. Except as provided by this chapter, a resulting company:
(1) may exercise only the rights and privileges of a stock insurance company; and
(2) is subject to:
(A) all of the requirements and rules imposed on stock insurance companies organized under this code; and
(B) the laws of this state relating to the regulation or supervision of insurance companies. (V.T.I.C. Art. 15.22, Secs. 1(6), 22(b).)
Sec. 826.004. CERTAIN CONVERSIONS PROHIBITED. A mutual insurance company may not convert to a stock insurance company under this chapter if, as a direct result of the conversion, any affiliate or other person acquires control of the resulting company, unless that affiliate or person complies with Section 823.154. (V.T.I.C. Art. 15.22, Sec. 22(a).)
Sec. 826.005. CORPORATE EXISTENCE. (a) On the effective date of a conversion under this chapter:
(1) the corporate existence of the converting company continues in the resulting company;
(2) all assets, rights, franchises, and interests of the converting company in and to property and any accompanying thing in action are vested in the resulting company without a deed or transfer; and
(3) the resulting company assumes all the obligations and liabilities of the converting company.
(b) Except as otherwise specified by the conversion plan, the directors and officers of the converting company serving on the effective date of the conversion serve as directors and officers of the resulting company until new directors and officers are elected under the articles of incorporation and bylaws of the resulting company. (V.T.I.C. Art. 15.22, Sec. 17.)
[Sections 826.006-826.050 reserved for expansion]
SUBCHAPTER B. CONVERSION PLAN ADOPTION AND REQUIREMENTS
Sec. 826.051. PLAN ADOPTION. (a) To convert to a stock insurance company a mutual insurance company must adopt, by the affirmative vote of at least two-thirds of the members of its board of directors, a conversion plan consistent with this chapter.
(b) For a conversion plan to take effect:
(1) the commissioner must approve the conversion plan; and
(2) the eligible members must approve the conversion plan and adopt the amended or restated articles of incorporation of the resulting company. (V.T.I.C. Art. 15.22, Secs. 2(a) (part), 15(a).)
Sec. 826.052. GENERAL REQUIREMENTS; EFFECT OF CONVERSION ON POLICIES. (a) Each conversion plan must include the provisions required by this chapter.
(b) Each policy in effect on the effective date of the conversion remains in effect under the terms of that policy, except that the following rights, to the extent they existed in the converting company, are extinguished on the effective date of the conversion:
(1) any voting rights of policyholders;
(2) except as provided by Subsection (c), a right to share in the surplus or profits of the converting company; and
(3) any assessment provisions.
(c) The holder of a participating policy in effect on the effective date of the conversion continues to have a right to receive dividends as provided by the participating policy.
(d) On the renewal date of a participating policy, the resulting company may issue to the insured a nonparticipating policy as a substitute for the participating policy, unless the participating policy is:
(1) a guaranteed renewable accident and health policy; or
(2) a guaranteed renewable, noncancellable accident and health policy.
(e) All the costs and expenses connected with a conversion plan shall be paid or reimbursed by the converting company or the resulting company. (V.T.I.C. Art. 15.22, Secs. 8, 18(b).)
Sec. 826.053. SALE OF CAPITAL STOCK. A conversion plan must provide that shares of capital stock of the resulting company shall be sold in a private placement, public offering, or an alternative method approved by the commissioner unless the shares are:
(1) sold or distributed to a holder of surplus notes of the converting company; or
(2) subscribed to by:
(A) a tax-qualified employee benefit plan under Section 826.059;
(B) a director or officer under Section 826.056(b); or
(C) an eligible member exercising subscription rights under Section 826.058. (V.T.I.C. Art. 15.22, Sec. 10(a).)
Sec. 826.054. PURCHASE PRICE OF CAPITAL STOCK. (a) A conversion plan must set the total price of the capital stock in an amount equal to the estimated pro forma market value of the resulting company based on an independent valuation by a qualified expert, giving consideration to the amount of capital that the board of directors considers necessary to be raised by the company. The pro forma market value may be the value estimated to be necessary to attract full subscription for the shares, as indicated by the independent valuation, and may be stated as a range of values.
(b) The conversion plan may set the purchase price for a share of capital stock at any reasonable amount. The price per share is not required to be the same for each class of purchaser. However, eligible members purchasing stock under subscription rights received under Section 826.058 may purchase shares at the lowest available price under the plan. (V.T.I.C. Art. 15.22, Secs. 10(b), (c).)
Sec. 826.055. LIMITATION ON ACQUISITION OF CAPITAL STOCK. (a) The conversion plan must provide that a person or group of persons acting in concert may not acquire, in the public or private offering or through the exercise of subscription rights, more than 10 percent of the capital stock of the resulting company except with the approval of the commissioner.
(b) This section does not apply to an entity that purchases 100 percent of the capital stock of the resulting company as part of the conversion plan approved by the commissioner. (V.T.I.C. Art. 15.22, Sec. 10(d).)
Sec. 826.056. DIRECTORS AND OFFICERS. (a) Except as otherwise provided by this section, the conversion plan must provide that a director or officer of the converting company, or a person acting in concert with a director or officer, may not acquire, without the permission of the commissioner, any capital stock of the resulting company or the stock of another corporation that is participating in the conversion plan before the third anniversary of the effective date of the conversion. This subsection does not prohibit a director or officer from:
(1) acquiring capital stock through a broker-dealer;
(2) making purchases through the exercise of subscription rights received under the conversion plan; or
(3) participating in a stock benefit plan permitted by Section 826.059 or approved by the eligible members under Section 826.107.
(b) A conversion plan may provide that the directors and officers of the converting company may receive, without payment, nontransferable subscription rights to purchase capital stock of the resulting company or the stock of another corporation that is participating in the conversion plan.
(c) The aggregate number of shares that may be purchased by directors and officers under Subsection (b) may not exceed:
(1) 35 percent of the total number of shares to be issued for the resulting company if the total assets of the converting company are less than $50 million; or
(2) 25 percent of the total number of shares to be issued for the resulting company if the total assets of the converting company are more than $500 million.
(d) For converting companies with total assets between $50 million and $500 million, inclusive, the maximum percentage of the total number of shares that may be purchased shall be interpolated from amounts provided under Subsection (c).
(e) A conversion plan must provide that a director or officer of the converting company may not sell stock purchased under the conversion plan before the first anniversary of the effective date of the conversion.
(f) Notwithstanding Subsection (e), a conversion plan may provide for the purchase or redemption of stock in the event that a director or officer is no longer associated with the resulting company during the period described by Subsection (e). (V.T.I.C. Art. 15.22, Secs. 10(e); 11; 13(a), (b).)
Sec. 826.057. RIGHTS OF HOLDER OF SURPLUS NOTES. A conversion plan must provide that any rights of a holder of a surplus note to participate in the conversion are governed by the terms of the surplus note. (V.T.I.C. Art. 15.22, Sec. 12.)
Sec. 826.058. SUBSCRIPTION RIGHTS; GENERAL PROVISIONS. (a) Except for an alternate conversion plan adopted under Section 826.061, each conversion plan must specify the subscription rights of eligible members.
(b) The conversion plan must provide that:
(1) each eligible member is to receive, without payment by the member, nontransferable subscription rights to purchase a portion of the capital stock of the resulting company; and
(2) in the aggregate, all eligible members have the right, before the right of any other party, to purchase 100 percent of the capital stock of the resulting company after provision for:
(A) capital stock required to be sold or distributed to the holders of surplus notes, if any;
(B) capital stock purchased by a stock benefit plan as permitted by Section 826.059; and
(C) capital stock acquired by the directors and officers, as permitted by Section 826.056(b).
(c) As an alternative to subscription rights in the resulting company, the conversion plan may provide that each eligible member is to receive, without payment by the member, nontransferable subscription rights to purchase a portion of the capital stock of:
(1) a corporation organized for the purpose of purchasing and holding all the stock of the resulting company;
(2) a stock insurance company owned by the converting company into which the converting company is to be merged; or
(3) an unaffiliated stock insurance company or other corporation that is to purchase all the stock of the resulting company.
(d) The conversion plan must provide that the subscription rights are allocated in whole shares among the eligible members using a fair and equitable formula. The formula may consider that the different classes of policies of the eligible members contributed to the surplus of the converting company or any other factors that may be fair or equitable as determined by the board of directors.
(e) The conversion plan must provide a fair and equitable method for allocating shares of capital stock in the event of an oversubscription to shares by eligible members exercising subscription rights under this section. (V.T.I.C. Art. 15.22, Sec. 9.)
Sec. 826.059. SUBSCRIPTION RIGHTS; TAX-QUALIFIED EMPLOYEE BENEFIT PLAN. The conversion plan may allocate to a tax-qualified employee benefit plan nontransferable subscription rights to purchase not more than 10 percent of the capital stock of the resulting company. (V.T.I.C. Art. 15.22, Sec. 13(c).)
Sec. 826.060. LIQUIDATION ACCOUNT. (a) The conversion plan may provide for the creation of a liquidation account for the benefit of members in the event of a voluntary liquidation after the conversion.
(b) The liquidation account must be in an amount equal to the surplus of the converting company, exclusive of the principal amount of any surplus note, on the last day of the quarter preceding the date the conversion plan is adopted. (V.T.I.C. Art. 15.22, Sec. 13(d).)
Sec. 826.061. ALTERNATE CONVERSION PLAN. (a) The board of directors may adopt a conversion plan that does not rely in whole or in part on the issuance of nontransferable subscription rights to members to purchase stock of the resulting company if the commissioner determines that the plan:
(1) complies with this chapter;
(2) is fair and equitable; and
(3) permits the resulting company to satisfy the requirements in effect on the date of the determination for a certificate of authority applicable to a domestic stock insurance company.
(b) The conversion plan may:
(1) include the merger of a domestic mutual insurance company with a domestic or foreign stock insurance company;
(2) provide for issuing stock, cash, or other consideration to members instead of subscription rights;
(3) provide for the formation of a mutual holding company under Subchapter E; or
(4) establish another plan containing other provisions approved by the commissioner.
(c) The commissioner may retain, at the converting company's expense, a qualified expert who is not a member of the commissioner's staff to assist in reviewing whether the conversion plan meets the requirements for approval by the commissioner. (V.T.I.C. Art. 15.22, Sec. 14.)
[Sections 826.062-826.100 reserved for expansion]
SUBCHAPTER C. ADOPTION OF CONVERSION PLAN
Sec. 826.101. PLAN INFORMATION FILED WITH COMMISSIONER; COMMISSIONER POWERS AND DUTIES. Not later than the 90th day after the date on which a converting company's board of directors adopts a conversion plan, the company shall file with the commissioner:
(1) a copy of the documents relating to the conversion plan, including the valuation required by Section 826.054(a);
(2) the form of notice required by Section 826.104;
(3) the form of proxy to be solicited from eligible members under Section 826.107(a);
(4) the form of notice required by Section 826.151 to persons whose policies are issued after adoption of the conversion plan but before the effective date of the conversion plan;
(5) the proposed amended or restated articles of incorporation of the resulting company;
(6) a statement regarding acquisition of control, if applicable, as required by Chapter 823; and
(7) any other information requested by the commissioner. (V.T.I.C. Art. 15.22, Sec. 3(a).)
Sec. 826.102. APPROVAL OF PLAN BY COMMISSIONER. (a) The commissioner shall approve a conversion plan if the commissioner determines that:
(1) the plan complies with this chapter;
(2) the plan's method of allocating subscription rights or other value is fair and equitable; and
(3) the resulting company would satisfy the requirements applicable to a domestic stock insurance company for a certificate of authority on the date of the determination.
(b) Except as otherwise provided by this section, the commissioner shall approve or disapprove a conversion plan not later than the 60th day after the first day on which all the documents required under Section 826.101 are filed with the commissioner.
(c) The commissioner may extend the time for decision by an additional 30 days on written notice to the converting company. Except as provided under Subsection (e), the commissioner may not extend the time for decision beyond that 30-day period.
(d) The commissioner shall immediately give written notice to the converting company of the commissioner's decision and, if the commissioner disapproves the plan, a detailed statement of the reasons for the disapproval.
(e) The commissioner may retain, at the mutual insurance company's expense, a qualified expert who is not a member of the commissioner's staff to assist the commissioner in reviewing the conversion plan and the valuation required under Section 826.054(a). If the commissioner retains a qualified expert under this subsection, the commissioner may extend the period for decision by an additional 60 days beyond the initial 60-day period.
(f) After giving written notice to the converting company and other interested persons, the commissioner may hold a hearing on whether the conversion plan complies with this chapter. The company and any other interested person have the right to appear at the hearing. Notice to interested persons who have not filed an appearance in the matter may be made through publication in the Texas Register. (V.T.I.C. Art. 15.22, Secs. 3(b), (c), (d), (e).)
Sec. 826.103. AMENDMENTS; WITHDRAWAL OF PLAN. Before a conversion plan takes effect, a converting company may amend or withdraw the plan by the affirmative vote of at least two-thirds of the members of its board of directors. (V.T.I.C. Art. 15.22, Sec. 4.)
Sec. 826.104. NOTICE TO ELIGIBLE MEMBERS; COMMENTS. (a) Not later than the 10th business day after the date of filing with the commissioner the documents required under Section 826.101, the converting company shall send to each eligible member a notice advising the member of:
(1) the adoption and filing of the conversion plan; and
(2) the member's right to comment on the plan to the commissioner and the converting company.
(b) The notice must include a description of the procedure to be used in making comments. An eligible member who elects to make comments must make the comments in writing not later than the 30th day after the date on which the notice is sent.
(c) Not later than the 60th day after the date of the commissioner's approval of the plan, the converting company shall send to each eligible member notice of the members' meeting to vote on the conversion plan. The notice must be sent to the member's last known address, as shown on the converting company's records, before the 30th day preceding the date set for the meeting. The notice must:
(1) briefly but fairly describe the proposed conversion plan; and
(2) inform the member of the member's right to vote on the conversion plan.
(d) If the meeting to vote on the conversion plan is held during the converting company's annual meeting of policyholders, a combined meeting notice satisfies the requirements of this section. (V.T.I.C. Art. 15.22, Sec. 5.)
Sec. 826.105. SUBSTANTIAL COMPLIANCE WITH NOTICE REQUIREMENTS. If the converting company in good faith substantially complies with the notice requirements of this chapter, the company's failure to send a member the required notice does not impair the validity of an action taken under this chapter. (V.T.I.C. Art. 15.22, Sec. 19.)
Sec. 826.106. INSOLVENT CONVERTING COMPANY; NOTICE REQUIREMENTS. If a converting company is insolvent or, in the judgment of the commissioner, is in hazardous financial condition, its board of directors, by a majority vote, may request in its submission to the commissioner a waiver of the requirements for notice to and approval of the proposed conversion by eligible members. The request must specify:
(1) the method and basis for the issuance of the resulting company's shares of its capital stock to an independent party in connection with an investment by the independent party in an amount sufficient to restore the resulting company to a sound financial condition; and
(2) that the conversion is to be accomplished without payment of consideration to past, present, or future policyholders if the commissioner determines that the value of the converting company is insufficient to justify that payment. (V.T.I.C. Art. 15.22, Sec. 21.)
Sec. 826.107. ELECTION; APPROVAL OF PLAN; ADOPTION OF AMENDED OR RESTATED ARTICLES OF INCORPORATION. (a) At a meeting convened to consider the conversion plan, an eligible member entitled to vote on the proposed conversion plan may vote in person or by proxy. The number of votes each eligible member may cast is determined by the converting company's bylaws. If the bylaws do not contain an applicable provision, each member may cast one vote. Before the eligible members may vote on approval of a conversion plan, the converting company must comply with Sections 826.101 and 826.102.
(b) At the meeting held to vote on the conversion plan, the eligible members shall also consider the adoption of amended or restated articles of incorporation.
(c) Adoption of the conversion plan or adoption of amended articles of incorporation requires the affirmative vote of at least two-thirds of the votes cast by eligible members. (V.T.I.C. Art. 15.22, Secs. 2(b), 6.)
Sec. 826.108. FILING OF MINUTES, ARTICLES OF INCORPORATION, AND BYLAWS; EFFECTIVE DATE OF CONVERSION. (a) Not later than the 30th day after the date on which the eligible members approve the conversion plan, the converting company shall file with the commissioner:
(1) the minutes of the meeting at which the plan was approved; and
(2) the amended or restated articles of incorporation and bylaws of the resulting company.
(b) A conversion plan takes effect on the date that the amended or restated articles of incorporation are filed with the commissioner. (V.T.I.C. Art. 15.22, Secs. 7, 15(b).)
Sec. 826.109. CONFLICT OF INTEREST. (a) Except as provided by a conversion plan approved by the commissioner or this section, a director, officer, agent, or employee of a converting company may not receive a fee, commission, or other consideration, other than that person's usual salary or compensation, for aiding, promoting, or assisting in a conversion under this chapter.
(b) This section does not prohibit the payment of reasonable fees and compensation to an attorney, accountant, or actuary for professional services performed by that person, even if the person is also a director or officer of the converting company. (V.T.I.C. Art. 15.22, Sec. 18(a).)
Sec. 826.110. LIMITATION ON ACTIONS. An action challenging the validity of or arising out of acts taken or proposed to be taken regarding a conversion plan under this chapter must be commenced not later than the 30th day after the effective date of the conversion plan. (V.T.I.C. Art. 15.22, Sec. 20.)
[Sections 826.111-826.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF MEMBERS ON CONVERSION
Sec. 826.151. RIGHTS OF MEMBERS WHOSE POLICIES ARE ISSUED AFTER ADOPTION OF CONVERSION PLAN BUT BEFORE EFFECTIVE DATE. (a) On issuance of a policy after a conversion plan has been adopted by the board of directors but before the effective date of the conversion plan, the converting company shall send to each member to whom a policy is issued a written notice regarding the conversion plan.
(b) Except as provided by Subsection (d), a member of an accident and health insurance company entitled to notice under Subsection (a) is entitled to rescind the member's policy and receive a full refund of any amount paid for the policy not later than the 10th day after the date on which the notice is received.
(c) Except as provided by Subsection (d), each member insured under a property or casualty insurance policy is entitled to notice under Subsection (a) and shall be advised of the member's right to:
(1) cancel the policy; and
(2) receive a pro rata refund of unearned premiums.
(d) A member who has made or filed a claim under the insurance policy is not entitled to a refund under Subsection (b) or (c). A member who has exercised a right provided by Subsection (b) or (c) may not make or file a claim under the insurance policy. (V.T.I.C. Art. 15.22, Sec. 16.)
Sec. 826.152. AMENDMENT OF POLICIES. A converting company, by endorsement or rider approved by the commissioner and sent to the policyholder, may simultaneously with or at any time after the adoption of a conversion plan amend an insurance policy in effect to terminate a right of the holder of the policy to share in the surplus or profits of the converting company. The amendment is void if the conversion plan does not take effect. (V.T.I.C. Art. 15.22, Sec. 23.)
[Sections 826.153-826.200 reserved for expansion]
SUBCHAPTER E. CONVERSION THROUGH MUTUAL HOLDING COMPANY
Sec. 826.201. CONVERSION THROUGH CREATION OF HOLDING COMPANY. (a) A converting company, on approval by the commissioner, may reorganize by forming a holding company based on a mutual plan and continuing the corporate existence of the converting company as a stock insurance company.
(b) A mutual holding company is considered an insurer subject to this chapter and Chapter 883. A mutual holding company is automatically a party to an administrative proceeding under this code involving an insurance company that, as a result of a reorganization under this subchapter, is a subsidiary of the mutual holding company. In any proceeding involving the resulting company, the assets of the mutual holding company are considered assets of the resulting company for purposes of satisfying the claims of the resulting company's policyholders.
(c) A mutual holding company may not dissolve or liquidate without the approval of the commissioner.
(d) A mutual holding company may convert to a stock holding company under this chapter as if the mutual holding company were a mutual insurance company. (V.T.I.C. Art. 15.22, Secs. 24(a)(1) (part), (d), (h).)
Sec. 826.202. COMMISSIONER POWERS AND DUTIES; APPROVAL. (a) The commissioner shall review the proposed plan of reorganization as an alternate conversion plan under Section 826.061. The commissioner may require as a condition of approval modifications of the proposed plan of reorganization that the commissioner determines necessary to protect the members' interests.
(b) The commissioner may retain a qualified expert as provided by Section 826.102(e).
(c) The commissioner has jurisdiction over a mutual holding company organized under this subchapter to ensure that member interests are protected. (V.T.I.C. Art. 15.22, Sec. 24(a)(1) (part).)
Sec. 826.203. APPLICABILITY OF CERTAIN LAWS; INCORPORATION. A mutual holding company that results from the reorganization of a domestic mutual insurance company organized under Chapter 883 must be organized under Sections 883.051, 883.052, 883.054, and 883.056. The articles of incorporation, and any amendments to those articles, of the mutual holding company are subject to approval of the commissioner in the same manner as those of a mutual insurance company. (V.T.I.C. Art. 15.22, Sec. 24(c).)
Sec. 826.204. MEMBERSHIP INTERESTS. (a) The membership interests of the policyholders of the resulting company become membership interests in the mutual holding company. Eligible members of the converting company become members of the mutual holding company in accordance with the articles of incorporation and bylaws of the mutual holding company.
(b) A membership interest in a mutual holding company does not constitute a security as defined by Section 4, The Securities Act (Article 581-4, Vernon's Texas Civil Statutes). (V.T.I.C. Art. 15.22, Secs. 24(a)(2) (part), (e).)
Sec. 826.205. CAPITAL STOCK HELD BY MUTUAL HOLDING COMPANY. (a) In this section:
(1) "Intermediate holding company" means a holding company that:
(A) is a subsidiary of a mutual holding company formed to reorganize a mutual insurance company; and
(B) directly or through a subsidiary intermediate holding company, owns the resulting company.
(2) "Majority of the voting shares of the capital stock" means shares of the capital stock of a company that carry the right to cast a majority of the votes entitled to be cast by all of the outstanding shares of the capital stock of the company on all matters submitted to a vote of the shareholders of the company.
(b) All of the initial shares of the capital stock of the resulting company shall be issued to the mutual holding company.
(c) The mutual holding company shall at all times own a majority of the voting shares of the capital stock of the resulting company or of an intermediate holding company established to hold the voting shares of the resulting company. The requirements of this subsection may be satisfied by indirect ownership through one or more intermediate holding companies in a corporate structure approved by the commissioner.
(d) The mutual holding company or intermediate holding company may not convey, transfer, assign, pledge, subject to a security interest or lien, encumber, or otherwise hypothecate or alienate the majority of the voting shares of the capital stock that is required to be owned under Subsection (c).
(e) A violation of Subsection (d) is void in inverse chronological order from the date of the conveyance or activity as to the shares necessary to constitute a majority of the voting shares of the capital stock. (V.T.I.C. Art. 15.22, Secs. 24(a)(2) (part), (f), (g).)
Sec. 826.206. CONVERSION OF FOREIGN MUTUAL INSURANCE COMPANY. (a) On the approval of the commissioner, a foreign mutual insurance company may reorganize in compliance with the requirements of any law or regulation applicable to the foreign mutual insurance company by:
(1) transferring its members' membership interests into a mutual holding company formed under a procedure analogous to that described by this subchapter; and
(2) continuing the corporate existence of the reorganizing foreign mutual insurance company as a foreign stock insurance company subsidiary of the mutual holding company.
(b) The reorganizing foreign mutual insurance company may remain a foreign company and may be admitted to do business in this state. A foreign mutual insurance company may also redomesticate in this state by complying with the applicable requirements of Chapter 983. (V.T.I.C. Art. 15.22, Sec. 24(b).)
CHAPTER 827. WITHDRAWAL AND RESTRICTION PLANS
Sec. 827.001. DEFINITION
Sec. 827.002. EXEMPTION
Sec. 827.003. WITHDRAWAL PLAN REQUIRED
Sec. 827.004. PROVISIONS OF WITHDRAWAL PLAN
Sec. 827.005. APPROVAL OF WITHDRAWAL PLAN
Sec. 827.006. RESUMPTION OF WRITING INSURANCE AFTER COMPLETE
WITHDRAWAL
Sec. 827.007. PENALTIES
Sec. 827.008. RESTRICTION PLAN
Sec. 827.009. DEPOSIT OF SECURITIES
Sec. 827.010. MORATORIUM
Sec. 827.011. RULES
CHAPTER 827. WITHDRAWAL AND RESTRICTION PLANS
Sec. 827.001. DEFINITION. In this chapter, "rating territory" means a rating territory established by the department. (V.T.I.C. Art. 21.49-2C, Sec. (a)(3).)
Sec. 827.002. EXEMPTION. This chapter does not apply to a transfer of business from an insurer to a company that:
(1) is under common ownership with the insurer; and
(2) is authorized to engage in the business of insurance in this state. (V.T.I.C. Art. 21.49-2C, Sec. (b).)
Sec. 827.003. WITHDRAWAL PLAN REQUIRED. An authorized insurer shall file with the commissioner a plan for orderly withdrawal if the insurer proposes to:
(1) withdraw from writing a line of insurance in this state or reduce the insurer's total annual premium volume by 75 percent or more; or
(2) reduce, in a rating territory, the insurer's total annual premium volume in a personal line of motor vehicle comprehensive or residential property insurance by 50 percent or more. (V.T.I.C. Art. 21.49-2C, Sec. (a)(1) (part).)
Sec. 827.004. PROVISIONS OF WITHDRAWAL PLAN. A withdrawal plan filed under Section 827.003 must:
(1) be constructed to protect the interests of the people of this state;
(2) indicate the dates on which the insurer intends to begin and to complete the plan; and
(3) provide for:
(A) meeting the insurer's contractual obligations;
(B) providing service to the insurer's policyholders and claimants in this state; and
(C) meeting any applicable statutory obligations, such as payment of assessments to the guaranty fund and participation in an assigned risk plan or joint underwriting arrangement. (V.T.I.C. Art. 21.49-2C, Sec. (a)(1) (part).)
Sec. 827.005. APPROVAL OF WITHDRAWAL PLAN. (a) The commissioner shall approve a withdrawal plan that adequately provides for meeting the requirements prescribed by Section 827.004(3).
(b) A withdrawal plan is deemed approved if the commissioner:
(1) does not hold a hearing on the plan before the 31st day after the date the plan is filed with the commissioner; or
(2) does not deny approval before the 31st day after the date a hearing on the plan is held. (V.T.I.C. Art. 21.49-2C, Secs. (e), (f) (part).)
Sec. 827.006. RESUMPTION OF WRITING INSURANCE AFTER COMPLETE WITHDRAWAL. An insurer that withdraws from writing all lines of insurance in this state may not, without the approval of the commissioner, resume writing insurance in this state before the fifth anniversary of the date of withdrawal. (V.T.I.C. Art. 21.49-2C, Sec. (d).)
Sec. 827.007. PENALTIES. The commissioner may impose the civil penalties under Chapter 82 on an insurer that fails to obtain the commissioner's approval before the insurer:
(1) withdraws from writing a line of insurance in this state; or
(2) reduces the insurer's total annual premium volume by 75 percent or more in any year. (V.T.I.C. Art. 21.49-2C, Sec. (f) (part).)
Sec. 827.008. RESTRICTION PLAN. (a) Before an insurer, in response to a catastrophic natural event that occurred during the preceding six months, may restrict writing new business in a rating territory in a personal line of comprehensive motor vehicle or residential property insurance, the insurer must file a proposed restriction plan with the commissioner for the commissioner's review and comment.
(b) The commissioner's approval of a restriction plan filed under Subsection (a) is not required. An insurer that files a restriction plan may institute the plan on or after the 15th day after the date the plan is filed.
(c) Notwithstanding Subsection (b), a withdrawal plan must be filed and approved under Sections 827.003 and 827.004 if an insurer's decision not to accept new business in a personal line of comprehensive motor vehicle or residential property insurance results in a reduction of the insurer's total annual premium volume by 50 percent or more. (V.T.I.C. Art. 21.49-2C, Sec. (a)(2).)
Sec. 827.009. DEPOSIT OF SECURITIES. Under this chapter, the commissioner may require the deposit of securities in this state in trust in the name of the commissioner if the commissioner determines, after notice and hearing, that there is reasonable cause to conclude that the interests of the people of this state are best served by the deposit. (V.T.I.C. Art. 21.49-2C, Sec. (c).)
Sec. 827.010. MORATORIUM. (a) The commissioner may impose a moratorium of not longer than two years on:
(1) the approval of withdrawal plans; or
(2) the implementation of plans to restrict the writing of new business described by Section 827.008.
(b) A moratorium under this section may be imposed on plans implemented after the commissioner has published notice of intention to impose a moratorium on plans under Subsection (a)(2).
(c) The commissioner may annually renew a moratorium imposed under this section.
(d) To impose or renew a moratorium under this section, the commissioner must determine, after notice and hearing, that a catastrophic event has occurred and that as a result of that event a particular line of insurance is not reasonably expected to be available to a substantial number of policyholders or potential policyholders in this state or, in the case of personal lines of motor vehicle comprehensive or residential property insurance, in a rating territory.
(e) The provisions of Chapter 2001, Government Code, relating to contested cases apply to the notice and hearing.
(f) The commissioner by rule shall establish reasonable criteria for applying the standards for determining whether to impose a moratorium under this section.
(g) The commissioner may limit a moratorium on withdrawal from or restriction of writing business in personal lines insurance to certain geographical areas of the state. (V.T.I.C. Art. 21.49-2C, Sec. (g).)
Sec. 827.011. RULES. The commissioner shall adopt rules as necessary to enforce this chapter. (V.T.I.C. Art. 21.49-2C, Sec. (h).)
CHAPTER 828. PURCHASE OF STOCK FOR TOTAL ASSUMPTION
REINSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 828.001. AUTHORITY TO PURCHASE STOCK FOR TOTAL
ASSUMPTION REINSURANCE
Sec. 828.002. EFFECT ON ANTITRUST LAWS
Sec. 828.003. INVESTMENTS OF REINSURED COMPANY
[Sections 828.004-828.050 reserved for expansion]
SUBCHAPTER B. EXCEPTION TO INVESTMENT LIMITATION
Sec. 828.051. EXCEPTION TO LIMITATION ON PURCHASING SHARES
OF OTHER COMPANY
Sec. 828.052. RESOLUTION OF INTENTION TO REINSURE
Sec. 828.053. MINIMUM STOCK ACQUISITION
Sec. 828.054. APPROVAL REQUIRED
Sec. 828.055. RESTRICTIONS ON REINSURED COMPANY
Sec. 828.056. REQUIRED EFFECTIVE DATE OF REINSURANCE
AGREEMENT; EFFECT OF FAILURE TO MEET REQUIRED
EFFECTIVE DATE
Sec. 828.057. PROHIBITION ON USE OF PURCHASING COMPANY'S
CAPITAL, SURPLUS, OR RESERVES
CHAPTER 828. PURCHASE OF STOCK FOR TOTAL ASSUMPTION
REINSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 828.001. AUTHORITY TO PURCHASE STOCK FOR TOTAL ASSUMPTION REINSURANCE. This code does not affect the right of a life insurance company organized or operating under Chapter 841, 882, or 982 to purchase or contract to purchase all or part of the outstanding shares of another domestic or foreign life insurance company that engages in a similar line of business in order to:
(1) reinsure all of the other company's business;
(2) assume all of the other company's liabilities; and
(3) take over all of the other company's assets. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.002. EFFECT ON ANTITRUST LAWS. This chapter does not affect in any manner the antitrust laws of this state. (V.T.I.C. Art. 21.26, Sec. 3.)
Sec. 828.003. INVESTMENTS OF REINSURED COMPANY. The investments of a company reinsured under this chapter are subject to Section 824.102 as if the company had been merged or consolidated. (V.T.I.C. Art. 21.26, Sec. 2.)
[Sections 828.004-828.050 reserved for expansion]
SUBCHAPTER B. EXCEPTION TO INVESTMENT LIMITATION
Sec. 828.051. EXCEPTION TO LIMITATION ON PURCHASING SHARES OF OTHER COMPANY. Article 3.39 does not apply to a purchase or contract described by Section 828.001 if all requirements of this subchapter are met. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.052. RESOLUTION OF INTENTION TO REINSURE. The intention to reinsure must be evidenced by a resolution adopted by the board of directors of the purchasing company on or before the purchase of the shares or the execution of a contract to purchase the shares. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.053. MINIMUM STOCK ACQUISITION. The purchasing company shall obtain or seek to obtain at least the number of shares of the other insurance company necessary to vote an approval of the total assumption reinsurance agreement under the laws of the state in which the other insurance company is organized by one or more of the following means:
(1) initially purchasing or contracting to purchase the shares; or
(2) offering to purchase, making a tender offer for, requesting or inviting tenders of, or otherwise seeking to acquire the shares in the open market or otherwise. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.054. APPROVAL REQUIRED. A purchase, offer to purchase, tender offer, request to purchase, or invitation to purchase shares in excess of the limits imposed under Article 3.39 may not be made until it is filed with and approved by the commissioner in accordance with Chapter 823. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.055. RESTRICTIONS ON REINSURED COMPANY. Following the earlier of the date of the contract to purchase the shares or the date of the commissioner's approval of the purchase, offer to purchase, tender offer, or request or an invitation to purchase the shares, the company the shares of which are being purchased may not purchase or contract to purchase any of its own shares as treasury shares, issue or contract to issue any of its authorized but unissued shares, or make any investments in or loans to the purchasing company or an affiliate of the purchasing company unless the investment or loan is otherwise authorized and approved in advance by the commissioner under Chapter 823. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.056. REQUIRED EFFECTIVE DATE OF REINSURANCE AGREEMENT; EFFECT OF FAILURE TO MEET REQUIRED EFFECTIVE DATE. (a) The reinsurance agreement must take effect on or before December 31 of the second year after the earlier of the year in which the initial purchase of shares is made or the year in which the initial contract to purchase is executed unless the commissioner for good cause shown extends that period.
(b) If the reinsurance agreement does not take effect within the period finally determined and extended by the commissioner, the purchasing company shall sell or otherwise dispose of the purchased shares that exceed the investment limitations imposed under Article 3.39 within six months of the final effective date. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
Sec. 828.057. PROHIBITION ON USE OF PURCHASING COMPANY'S CAPITAL, SURPLUS, OR RESERVES. Amounts actually paid by the purchasing company for the purchase of shares acquired or obtained under this subchapter may not include the minimum capital, minimum surplus, and policy reserves required by law for the purchasing company. (V.T.I.C. Art. 21.26, Sec. 1 (part).)
[Chapters 829-840 reserved for expansion]
SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND
RELATED ENTITIES
CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 841.001. DEFINITIONS
Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW
Sec. 841.003. APPLICABILITY OF LAW GOVERNING
CORPORATIONS
Sec. 841.004. NET ASSETS DEFINED; RULES
[Sections 841.005-841.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF DOMESTIC COMPANIES
Sec. 841.051. FORMATION OF COMPANY
Sec. 841.052. ARTICLES OF INCORPORATION
Sec. 841.053. COMPANY NAME
Sec. 841.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS
Sec. 841.055. SHARES OF STOCK
Sec. 841.056. REQUIREMENTS FOR SHARES OF STOCK WITH PAR
VALUE
Sec. 841.057. REQUIREMENTS FOR SHARES OF STOCK WITHOUT
PAR VALUE
Sec. 841.058. APPLICATION FOR CHARTER
Sec. 841.059. ACTION BY COMMISSIONER AND DEPARTMENT AFTER
FILING
Sec. 841.060. APPLICATION PROCESS
Sec. 841.061. ACTION ON APPLICATION
Sec. 841.062. BEGINNING OF CORPORATE EXISTENCE
Sec. 841.063. ORGANIZATION MEETING
[Sections 841.064-841.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 841.101. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 841.102. SCHEDULE OF ASSETS
Sec. 841.103. ISSUANCE OF CERTIFICATE OF AUTHORITY
[Sections 841.104-841.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF COMPANY
Sec. 841.151. CONDUCTING SHAREHOLDERS' MEETING
Sec. 841.152. BOARD OF DIRECTORS
Sec. 841.153. ELECTION OF DIRECTORS
Sec. 841.154. STAGGERED TERMS FOR LARGE BOARD OF
DIRECTORS
Sec. 841.155. OFFICERS
Sec. 841.156. AMENDMENT OF CHARTER OR ARTICLES
[Sections 841.157-841.200 reserved for expansion]
SUBCHAPTER E. CAPITAL AND SURPLUS
Sec. 841.201. FORM OF REQUIRED CAPITAL AND SURPLUS
Sec. 841.202. AUTHORIZED SHARES
Sec. 841.203. COMPANY'S REPURCHASE OF STOCK
Sec. 841.204. EXEMPTION FROM REQUIRED INCREASE OF CAPITAL
AND SURPLUS
Sec. 841.205. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND
SURPLUS AMOUNTS
Sec. 841.206. IMPAIRMENT OF CAPITAL AND SURPLUS
Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND
SURPLUS REQUIREMENTS NOT SATISFIED
[Sections 841.208-841.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS, DUTIES, AND LIMITATIONS
Sec. 841.251. EVIDENCE OF EXPENDITURES
Sec. 841.252. PAYMENTS TO OFFICERS, DIRECTORS, AND
EMPLOYEES
Sec. 841.253. LIFE INSURANCE COMPANY'S PAYMENT OF
DIVIDENDS
Sec. 841.254. TRANSFER OF STOCK
Sec. 841.255. ANNUAL STATEMENT; FILING FEE
Sec. 841.256. BUSINESS IN SEPARATE DEPARTMENTS OF DOMESTIC
INSURANCE COMPANY
Sec. 841.257. KINDS OF BUSINESS LIMITED
Sec. 841.258. AGENTS FOR COMPANY THAT CEASES WRITING NEW
BUSINESS
Sec. 841.259. PROHIBITED ACTIVITIES OF DIRECTORS
AND OFFICERS
Sec. 841.260. PROHIBITED COMMISSIONS
Sec. 841.261. CAUSES OF ACTION
[Sections 841.262-841.300 reserved for expansion]
SUBCHAPTER G. PROHIBITIONS AND RESTRICTIONS
ON ISSUANCE OF POLICIES
Sec. 841.301. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH
INSURANCE POLICIES
Sec. 841.302. LIMITS ON LIFE OR ACCIDENTAL
DEATH INSURANCE
[Sections 841.303-841.350 reserved for expansion]
SUBCHAPTER H. DEPOSIT OF SECURITIES
Sec. 841.351. DEPOSIT WITH COMPTROLLER
Sec. 841.352. ISSUANCE OF RECEIPT FOR DEPOSIT
Sec. 841.353. ADVERTISEMENT OF DEPOSIT
Sec. 841.354. ACCESS TO DEPOSIT
Sec. 841.355. WITHDRAWAL OF DEPOSIT AFTER MERGER,
CONSOLIDATION, OR TOTAL REINSURANCE
Sec. 841.356. SITUS OF DEPOSIT FOR TAX PURPOSES
Sec. 841.357. MAINTENANCE OF DEPOSIT
[Sections 841.358-841.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT AND INTERVENTION
Sec. 841.701. REVOCATION OF CERTIFICATE OF AUTHORITY
Sec. 841.702. APPEAL OF DETERMINATION TO REVOKE
CERTIFICATE
Sec. 841.703. CERTIFICATE OF AUTHORITY VOID ON FAILURE
TO SATISFY JUDGMENT
Sec. 841.704. FALSE STATEMENT, REPORT, OR OTHER DOCUMENT;
CRIMINAL PENALTY
CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 841.001. DEFINITIONS. (1) "Accident insurance company" means a corporation authorized under a charter to engage in business involving the payment of money or another thing of value in the event of an injury to or the disablement or death of an individual as a result of travel or a general accident by land or water.
(2) "Alien company" means a life, accident, or health insurance company organized under the laws of a foreign country.
(3) "Beneficiary" is the person to whom an insurance policy is payable.
(4) "Domestic insurance company," in this chapter and another law described by Section 841.002, means an insurance company organized under the laws of this state as:
(A) a life insurance company;
(B) an accident insurance company;
(C) a life and accident insurance company;
(D) a health and accident insurance company; or
(E) a life, health, and accident insurance company.
(5) "Foreign company" means a life, accident, or health insurance company organized under the laws of another state.
(6) "Health insurance company" means a corporation authorized under a charter to engage in business involving the payment of money or another thing of value in the event of loss resulting from disability incurred as a result of sickness or ill health.
(7) "Home office," with respect to an insurance company, means the principal office of the company in the state or country under whose laws the company is organized.
(8) "Insurance company" and "company" include all corporations engaged as a principal in the business of life, accident, or health insurance.
(9) "Life insurance company" means a corporation authorized under a charter to engage in business involving the payment of money or another thing of value conditioned on the continuance or cessation of human life or involving an insurance, guaranty, or contract for the payment of an endowment or annuity.
(10) "Policyholder" and "insured" mean the individual on whose life an insurance policy is effected.
(11) "Profits," with respect to an insurance company, means the portion of the company's funds that are not:
(A) required for the payment of losses and expenses; or
(B) set aside for any other purpose required by law.
(12) "United States branch" means:
(A) the business unit through which business is transacted within the United States by an alien company;
(B) the assets and liabilities of the company within the United States pertaining to the business;
(C) the management powers pertaining to the business and to the assets and liabilities; or
(D) any combination of the items described by Paragraphs (A)-(C).
(13) The definitions of "company" and "insurance company" apply to this chapter and another law described by Section 841.002 unless a different meaning is plainly required by the context in which the term appears. (V.T.I.C. Art. 3.01, Secs. 1, 2, 3, 4, 5, 6, 7, 7A, 8, 9, 11, 13.)
Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW. Except as otherwise expressly provided by this code, each insurance company incorporated or engaging in business in this state as a life insurance company, an accident insurance company, a life and accident insurance company, a health and accident insurance company, or a life, health, and accident insurance company is subject to:
(1) this chapter;
(2) Chapter 3; and
(3) Title 7. (V.T.I.C. Art. 3.02, Sec. 3.)
Sec. 841.003. APPLICABILITY OF LAW GOVERNING CORPORATIONS. An insurance company operating under this chapter is subject to the Texas Business Corporation Act, the Texas Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes), and any other law of this state that governs corporations in general to the extent those laws are not inconsistent with this chapter or another law described by Section 841.002. (V.T.I.C. Art. 3.69.)
Sec. 841.004. NET ASSETS DEFINED; RULES. (a) A company's "net assets" consist of the company's funds that are available for the payment of a company's obligations in this state, including:
(1) uncollected premiums that are not more than three months past due and deferred premiums on policies actually in force, after the deduction of:
(A) all unpaid losses and claims;
(B) all claims for losses; and
(C) all other debts, exclusive of capital stock; and
(2) if the total value of the equipment exceeds $2,000, the value of all electronic machines that comprise a data processing system or systems and of all other office equipment, furniture, machines, and labor-saving devices purchased for and used in connection with the business of the insurance company to the extent that the total actual cash market value of those assets is less than 10 percent of the other admitted assets of the company.
(b) The commissioner may adopt rules defining electronic machines and systems, office equipment, furniture, machines, and labor-saving devices described by Subsection (a) and stating the maximum period for which each class of equipment may be amortized. (V.T.I.C. Art. 3.01, Sec. 10 (part).)
[Sections 841.005-841.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF DOMESTIC COMPANIES
Sec. 841.051. FORMATION OF COMPANY. (a) Three or more residents of this state may form:
(1) a life insurance company;
(2) an accident insurance company;
(3) a life and accident insurance company;
(4) a health and accident insurance company; or
(5) a life, health, and accident insurance company.
(b) To form a domestic insurance company:
(1) each incorporator must sign and acknowledge the articles of incorporation of the company; and
(2) the incorporators must file the articles of incorporation with the department. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.052. ARTICLES OF INCORPORATION. (a) Articles of incorporation of a proposed domestic insurance company must state:
(1) the name of the company;
(2) the location of the company's home office;
(3) the kinds of insurance business the company will transact;
(4) the name and place of residence of each incorporator;
(5) the amount of the company's capital stock;
(6) the number of shares of the company's capital stock;
(7) the amount of the company's surplus; and
(8) the period of the company's duration, which may be perpetual.
(b) The incorporators of a domestic insurance company may include in the articles of incorporation other provisions that are not inconsistent with law. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.053. COMPANY NAME. (a) The name of a domestic insurance company must contain the words "Insurance Company."
(b) A domestic insurance company's name may not be so similar to the name of another domestic insurance company as to likely mislead the public. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A domestic insurance company must have capital stock in an amount of at least $700,000 and surplus in an amount of at least $700,000.
(b) All of the capital stock required by Subsection (a) must be fully subscribed and paid up and delivered to the incorporators before the articles of incorporation are filed.
(c) At the time of incorporation, the required capital and surplus shall consist only of:
(1) United States currency;
(2) bonds of the United States, this state, or a county or municipality of this state; or
(3) government insured mortgage loans that are authorized by this chapter or Chapter 3, with not more than 50 percent of the required capital invested in first mortgage real property loans. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.055. SHARES OF STOCK. (a) The shares of stock of an insurance company operating under this chapter may be divided or converted into shares of stock with a par value or shares of stock without par value or into a combination of shares with or without par value.
(b) Each issued share of stock must be fully paid for and nonassessable.
(c) The insurance company by an amendment to its charter may increase or decrease the total number of shares of stock the company is authorized to issue if:
(1) shares representing at least 50 percent of the total par value of the authorized shares with a par value, if any, have been in good faith subscribed and fully paid for; and
(2) shares representing at least 50 percent of the total number of the authorized shares without a par value, if any, have been in good faith subscribed and fully paid for.
(d) Authorized but unissued shares of stock of an insurance company are not considered capital, stock, or capital stock of the company.
(e) This section and Sections 841.056 and 841.057 do not impair the charter rights of an insurance company authorized to issue shares of stock with or without a par value before September 6, 1955. (V.T.I.C. Art. 3.02a, Subsecs. (a) (part), (d).)
Sec. 841.056. REQUIREMENTS FOR SHARES OF STOCK WITH PAR VALUE. (a) The shares of stock of an insurance company operating under this chapter that are divided or converted into par value shares, if any, must have a par value of not less than $1 or more than $100.
(b) Each par value share of stock must be fully paid for before issuance in an amount that is not less than the share's par value.
(c) When an application for charter or an amendment to the charter authorizing the issuance of shares of stock with a par value is filed, the insurance company shall file with the department a statement under oath stating:
(1) the total number of par value shares subscribed; and
(2) the actual total consideration the company received for those shares.
(d) The shareholders of an insurance company authorizing par value shares of stock must in good faith subscribe and fully pay for shares representing at least 50 percent of the total par value of the authorized shares with a par value before the company:
(1) is granted a charter; or
(2) amends its charter to authorize the issuance of par value shares.
(e) If all of the authorized par value shares of stock are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the insurance company shall file with the department a certificate authenticated by a majority of the directors stating the total number of par value shares issued and the actual total consideration received for those shares. The company shall file the certificate not later than the 90th day after the date of issuance of those remaining shares. The company is not required to file an amendment to its charter or take further action to effect the increase in the capital and surplus of the company.
(f) The consideration received by an insurance company for a par value share constitutes capital to the extent of its par value and the remainder, if any, constitutes surplus. (V.T.I.C. Art. 3.02a, Subsecs. (a) (part), (b) (part), (c) (part).)
Sec. 841.057. REQUIREMENTS FOR SHARES OF STOCK WITHOUT PAR VALUE. (a) The shares of stock of an insurance company operating under this chapter that are divided or converted into shares without par value, if any, must be equal in all respects.
(b) An insurance company may issue and dispose of authorized shares without par value for money or for notes, mortgages, and stocks in the form authorized by law for capital stock of insurance companies. Each share of stock without par value must be fully paid before issuance. After the company receives payment for a share of stock issued under this section, the share is not subject to additional call or assessment, and the subscriber or holder of the share is not required to make an additional payment with respect to the share.
(c) The shareholders of an insurance company authorizing shares of stock without par value must in good faith subscribe and pay for shares representing at least 50 percent of the authorized shares without par value before the company is granted a charter or has its charter amended to authorize the issuance of shares without par value. The total amount paid for the shares must be at least $250,000.
(d) When an application for charter or an amendment to the charter authorizing the issuance of shares without par value is filed, the insurance company shall file with the department a statement under oath stating:
(1) the number of shares without par value subscribed; and
(2) the actual consideration the company received for those shares.
(e) If all of the authorized shares of stock without par value are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the insurance company shall file with the department a certificate authenticated by a majority of the directors stating the number of shares without par value issued and the consideration received for those shares.
(f) The insurance company shall file the certificate required by Subsection (e) not later than the 90th day after the date of issuance of those remaining shares. The portion of the consideration received for shares without par value that is designated as capital by the company's directors, or by the company's shareholders if the charter or articles of incorporation reserve the right to make that determination to the shareholders, constitutes capital and the remainder, if any, constitutes surplus. The company is not required to file an amendment to its charter or take further action to effect the increase in the capital and surplus of the company. (V.T.I.C. Art. 3.02a, Subsecs. (a) (part), (b) (part), (c) (part).)
Sec. 841.058. APPLICATION FOR CHARTER. (a) To obtain a charter for a domestic insurance company, the incorporators must pay to the department the charter fee in an amount determined under Article 4.07 and file with the department:
(1) an application for charter on the form and containing the information prescribed by the commissioner;
(2) the company's articles of incorporation; and
(3) an affidavit made by two or more of the incorporators that states that:
(A) the minimum capital and surplus requirements of Section 841.054 are satisfied;
(B) the capital and surplus are the bona fide property of the company; and
(C) the information in the articles of incorporation is true and correct.
(b) The commissioner may require that the incorporators provide at their expense additional evidence of a matter required in the affidavit before the commissioner takes further action on the application for charter. (V.T.I.C. Art. 3.04, Sec. 1.)
Sec. 841.059. ACTION BY COMMISSIONER AND DEPARTMENT AFTER FILING. (a) After the charter fee is paid and all items required for a charter under Section 841.058 are filed with the department:
(1) the commissioner may set a date for a hearing on the application; and
(2) the department shall make or cause to be made a full and thorough examination of the domestic insurance company before the hearing.
(b) The domestic insurance company shall pay for the examination under Subsection (a)(2). (V.T.I.C. Art. 3.04, Sec. 2 (part); Art. 3.06 (part).)
Sec. 841.060. APPLICATION PROCESS. (a) The date for a hearing on an application for charter may not be before the 11th day or later than the 30th day after the date notice is provided under Subsection (b).
(b) The commissioner shall:
(1) provide written notice of the date of a hearing to:
(A) the person or persons who filed the application; and
(B) any interested party, including any other party who had previously requested a copy of the notice; and
(2) publish, at the expense of the incorporators, a copy of the notice in a newspaper of general circulation in the county in which the domestic insurance company's home office is proposed to be located.
(c) The department shall make a record of the proceedings of a hearing under this section.
(d) An interested party is entitled to oppose or support the granting or denial of the application and may intervene and participate fully and in all respects in any hearing or other proceeding on the application. An intervenor has the rights and privileges of a proper or necessary party in a civil suit in the courts of this state, including the right to be represented by counsel. (V.T.I.C. Art. 3.04, Sec. 2 (part).)
Sec. 841.061. ACTION ON APPLICATION. (a) In considering the application, the commissioner, not later than the 30th day after the date a hearing under Section 841.060 is completed, shall determine if:
(1) the minimum capital and surplus required by Section 841.054 are the bona fide property of the domestic insurance company;
(2) the proposed officers, directors, and managing executive of the company have sufficient insurance experience, ability, and standing to make success of the proposed company probable; and
(3) the applicants are acting in good faith.
(b) If the commissioner determines by an affirmative finding any of the issues under Subsection (a) adversely to the applicants, the commissioner shall reject the application in writing, giving the reason for the rejection. An application may not be granted unless it is adequately supported by competent evidence.
(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application. On approval of an application, the department shall record the information required by Section 841.058 in records maintained for that purpose. On receipt of a fee in the amount determined under Article 4.07, the commissioner shall provide to the incorporators a certified copy of the application, articles of incorporation, and submitted affidavit. (V.T.I.C. Art. 3.04, Secs. 2 (part), 3, 4 (part).)
Sec. 841.062. BEGINNING OF CORPORATE EXISTENCE. On receipt of the certified copy of documents under Section 841.061(c), the domestic insurance company becomes a body politic and corporate, and the incorporators may complete organization of the company under Section 841.063. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.063. ORGANIZATION MEETING. (a) After receipt of the certified copy of documents under Section 841.061(c), the incorporators shall promptly call a meeting of the domestic insurance company's shareholders. The shareholders shall:
(1) adopt bylaws to govern the company; and
(2) elect the company's initial board of directors.
(b) The directors elected under this section serve until directors are first elected under Section 841.153. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
[Sections 841.064-841.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 841.101. CERTIFICATE OF AUTHORITY REQUIRED. A domestic insurance company may not engage in the business of insurance in this state, except for the lending of money, without first obtaining from the commissioner a certificate of authority that:
(1) shows that the company has fully complied with the laws of this state; and
(2) authorizes the company to engage in the business of insurance in this state. (V.T.I.C. Art. 3.57 (part).)
Sec. 841.102. SCHEDULE OF ASSETS. Two or more officers of the domestic insurance company shall execute and file with the department:
(1) a sworn schedule of each of the assets of the company exhibited to the department during the examination under Section 841.059 showing the value of the assets; and
(2) a sworn statement that the assets are the bona fide, unconditional, and unencumbered property of the company and are worth the amount stated in the schedule. (V.T.I.C. Art. 3.06 (part).)
Sec. 841.103. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) If the commissioner makes a determination favorable to the applicants on all issues under Section 841.061(a), the commissioner, on compliance with the requirements of Section 841.102, shall issue to the domestic insurance company a certificate of authority authorizing the company to engage in the kinds of business authorized by the company's charter.
(b) On written request of a domestic insurance company, the commissioner shall provide a certified copy of the company's certificate of authority to the company for each of the company's agents in this state. (V.T.I.C. Arts. 3.06 (part), 3.09.)
[Sections 841.104-841.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF COMPANY
Sec. 841.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a meeting of a domestic insurance company's shareholders, each shareholder is entitled to one vote for each fully paid up share of stock appearing in the shareholder's name on the company's books, except to the extent that the articles of incorporation increase, limit, or deny voting rights to the holders of the shares of a class of stock as authorized by the Texas Business Corporation Act.
(b) A shareholder may vote in person or by written proxy.
(c) At a shareholders' meeting, a quorum is any number of shareholders whose cumulative stock ownership in the domestic insurance company represents a majority of the company's paid up capital stock. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of the domestic insurance company, as adopted or amended by the shareholders or directors, the board of directors has full management and control of the company.
(b) The board consists of not fewer than five directors. A director is not required to be a shareholder unless such a qualification is required by the articles of incorporation or bylaws of the company.
(c) The directors shall keep a full and correct record of the board's transactions. The shareholders may inspect those records during business hours.
(d) The directors shall fill a vacancy that occurs on the board or in any office of the company.
(e) A majority of the board is a quorum. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.153. ELECTION OF DIRECTORS. (a) After a domestic insurance company completes the organization of the company under Section 841.063, the company shall hold an annual meeting of the company's shareholders on the fourth Tuesday in April at the home office of the company to elect the company's board of directors.
(b) After the directors are first elected under this section, the annual meeting must be before May 1 of each year as established by the company's bylaws. The directors serve one-year terms beginning immediately after the election, except as provided by Section 841.154.
(c) If the shareholders do not elect directors at an annual meeting, the shareholders may elect the directors at a special shareholders' meeting called for that purpose. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a) This section applies only to a domestic insurance company whose board of directors consists of at least nine members.
(b) The bylaws of a domestic insurance company may provide that the company's directors, other than initial directors, may be elected to serve staggered terms as provided by this section.
(c) The company's directors shall be divided into two or three classes, with each class consisting of an equal number of directors to the extent possible. After the directors are divided into classes:
(1) the terms of the directors in the first class expire on the first annual meeting date after their initial election;
(2) the terms of the directors in the second class expire on the second annual meeting date after their initial election; and
(3) the terms of the directors in the third class, if any, expire on the third annual meeting date after their initial election.
(d) At each annual meeting after the directors are first elected, the shareholders shall elect the number of directors whose terms expire on that date. Directors are elected for:
(1) staggered two-year terms, if the board is divided into two classes; or
(2) staggered three-year terms, if the board is divided into three classes. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.155. OFFICERS. (a) A domestic insurance company's directors shall choose one of the directors to serve as the company's president.
(b) Other officers of the domestic insurance company shall be chosen in accordance with the company's bylaws. An officer is not required to be a shareholder unless such a qualification is required by the company's articles of incorporation or bylaws. An officer other than the president is not required to be a director unless such a qualification is required by the company's bylaws.
(c) The duties and compensation of a domestic insurance company's officers are as stated in the company's bylaws. If the bylaws do not state the duties or compensation of the officers, the directors shall establish the duties or compensation. (V.T.I.C. Art. 3.04, Sec. 4 (part).)
Sec. 841.156. AMENDMENT OF CHARTER OR ARTICLES. (a) The shareholders of a domestic insurance company by resolution may amend the company's charter or articles of incorporation at any shareholders' meeting.
(b) The amendment and a copy of the resolution certified by the president and secretary of the domestic insurance company shall be filed and recorded in the same manner as the charter.
(c) An amendment of the charter or articles takes effect when it is recorded. (V.T.I.C. Art. 3.05, Subsec. (a) (part).)
[Sections 841.157-841.200 reserved for expansion]
SUBCHAPTER E. CAPITAL AND SURPLUS
Sec. 841.201. FORM OF REQUIRED CAPITAL AND SURPLUS. Notwithstanding any other provision of this code, after a charter is granted under this chapter, the domestic insurance company:
(1) shall maintain the company's minimum capital at all times in a form described by Section 841.054(c); and
(2) may invest the company's surplus as provided by this code. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.202. AUTHORIZED SHARES. (a) At any shareholders' meeting, shareholders of a domestic insurance company whose cumulative stock ownership represents a majority of the capital stock of the company by resolution may increase or decrease the amount of the company's capital stock, subject to this section.
(b) Capital stock may never be decreased to an amount that is less than the minimum amount of paid-up stock required by Section 841.054.
(c) Two officers of the domestic insurance company must sign and acknowledge a statement of the increase or decrease. The acknowledged statement and a certified copy of the resolution shall be filed and recorded in the same manner as the charter.
(d) For an increase or decrease of capital stock, the domestic insurance company may require the return of the original certificates evidencing the stock in exchange for new certificates. An issuance of new certificates that results in a transfer of stock is subject to Section 841.254. (V.T.I.C. Art. 3.05, Subsec. (a) (part).)
Sec. 841.203. COMPANY'S REPURCHASE OF STOCK. (a) A legal reserve life insurance company may purchase in the name of the company outstanding shares of the company's capital stock as provided by the Texas Business Corporation Act.
(b) A purchase of stock under this section is not considered an investment and does not violate the provisions of this code relating to eligible investments for a legal reserve life insurance company.
(c) A legal reserve life insurance company that purchases stock under this section shall file with the department not later than the 10th day after the date of the purchase a statement that contains:
(1) the name of each shareholder from whom the shares were purchased; and
(2) the sum of money paid for those shares. (V.T.I.C. Art. 3.05, Subsec. (b).)
Sec. 841.204. EXEMPTION FROM REQUIRED INCREASE OF CAPITAL AND SURPLUS. (a) Except as otherwise provided by this chapter, a domestic insurance company that after September 1, 1991, had less than the minimum amount of capital and surplus required for a newly incorporated company under Section 841.054 may continue to transact the kinds of business for which it holds a certificate of authority.
(b) The insurance company shall immediately increase the amount of its capital to the required amount of capital under Section 841.054 if there is:
(1) a change in the control of at least 50 percent of the voting securities of the insurance company;
(2) a change in the control of at least 50 percent of the voting securities of a holding company controlling the insurance company; or
(3) a change in control of at least 50 percent by any other method of control if the insurance company or holding company is not controlled by voting securities.
(c) For purposes of Subsection (b), a transfer of ownership that occurs because of death, regardless of whether the decedent died testate or intestate, may not be considered a change in the control of an insurance company or holding company if ownership is transferred solely to one or more individuals, each of whom would be an heir of the decedent if the decedent had died intestate. (V.T.I.C. Art. 3.02, Sec. 2(a).)
Sec. 841.205. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND SURPLUS AMOUNTS. (a) The commissioner by rule or guideline may require a domestic insurance company that writes or assumes a life insurance or annuity contract or assumes liability on or indemnifies one person for any risk under an accident and health insurance policy, or a combination of these policies, in an amount that exceeds $10,000, to maintain capital and surplus in amounts that exceed the minimum amounts required by this chapter because of:
(1) the nature and kind of risks the company underwrites or reinsures;
(2) the premium volume of risks the company underwrites or reinsures;
(3) the composition, quality, duration, or liquidity of the company's investment portfolio;
(4) fluctuations in the market value of securities the company holds; or
(5) the adequacy of the company's reserves.
(b) A rule adopted under Subsection (a) must be designed to ensure the financial solvency of an insurance company for the protection of policyholders but may not require that the total admitted assets of a company exceed 106 percent of its total liabilities.
(c) A fraternal benefit society operating under Chapter 885 and a mutual life insurance company operating under Chapter 882 are subject to a rule adopted under this section. (V.T.I.C. Art. 3.02, Secs. 2A(a)(part), (b); 3A.)
Sec. 841.206. IMPAIRMENT OF CAPITAL AND SURPLUS. (a) A domestic insurance company may not have:
(1) the company's required capital impaired;
(2) more than 90 percent of the company's required minimum surplus impaired; or
(3) the surplus required under Section 841.205 impaired.
(b) If the commissioner determines that an insurance company's capital or surplus is impaired in violation of this section, the commissioner shall:
(1) order the company to immediately reduce the level of impairment to an acceptable level of impairment as specified by the commissioner or prohibit the company from engaging in the business of insurance in this state; and
(2) begin proceedings as necessary to determine any further actions with respect to the impairment. (V.T.I.C. Art. 3.60.)
Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND SURPLUS REQUIREMENTS NOT SATISFIED. If an insurance company does not comply with the capital and surplus requirements of this chapter, the commissioner may order the insurance company to cease writing new business and may:
(1) place the insurance company under state supervision or conservatorship;
(2) declare the insurance company to be in a hazardous condition as provided by Article 1.32;
(3) declare the insurance company to be impaired as provided by Section 841.206; or
(4) apply to the insurance company any other applicable sanction provided by this code. (V.T.I.C. Art. 3.02, Sec. 1(b).)
[Sections 841.208-841.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS, DUTIES, AND LIMITATIONS
Sec. 841.251. EVIDENCE OF EXPENDITURES. (a) A domestic insurance company may not make an expenditure of $100 or more unless the expenditure is evidenced by a voucher that:
(1) is signed by or on behalf of the individual, firm, or corporation that receives the money; and
(2) describes the consideration received for the payment correctly.
(b) For an expenditure for both services and disbursements, the voucher must state the services rendered and disbursement made.
(c) For an expenditure related to a matter pending before a legislature or public body or a department or officer of a state or government, the voucher must describe both the nature of the matter and the interest of the company in the matter correctly.
(d) If the domestic insurance company cannot obtain a voucher as required by this section, the expenditure must be evidenced by:
(1) a paid check; or
(2) an affidavit that:
(A) describes the nature and purpose of the expenditure; and
(B) states the reason the voucher was not obtained. (V.T.I.C. Art. 3.13.)
Sec. 841.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES. (a) Unless first authorized by a vote of a domestic insurance company's board of directors or a committee of the board that has the duty to authorize the payments, the company may not pay any compensation or emolument in an amount that, when added to any compensation or emolument paid to the person by an affiliated domestic insurance company, exceeds $100,000 in any year to an individual, firm, or corporation, including an officer or director of the company.
(b) Subsection (a) does not prevent a domestic insurance company from contracting with its agents for the payment of renewal commissions.
(c) The shareholders of a domestic insurance company may authorize the creation of one or more plans for the payment of pensions, retirement benefits, or group insurance for the company's officers and employees. The shareholders may delegate to the company's board of directors the power and duty to prepare, effect, finally approve, administer, and amend a plan.
(d) A mutual insurance company, acting through the company's policyholders, may exercise the same discretion, and has the same powers, privileges, and rights, as are conferred on a domestic insurance company under Subsection (c). (V.T.I.C. Art. 3.12.)
Sec. 841.253. LIFE INSURANCE COMPANY'S PAYMENT OF DIVIDENDS. (a) A life insurance company may declare or pay a dividend to its:
(1) policyholders only from the expense loading and profits made by the company; and
(2) shareholders only from the company's earned surplus, as defined by the commissioner.
(b) A life insurance company that is not showing a profit may pay a dividend on its participating policies from the expense loading on those policies.
(c) A life insurance company may not discriminate between policyholders in paying a dividend from the expense loading under this section. (V.T.I.C. Art. 3.11 (part).)
Sec. 841.254. TRANSFER OF STOCK. (a) A domestic insurance company's shares of stock are transferrable on the company's books, in accordance with law and the bylaws of the company, by the owner or the owner's authorized agent.
(b) Each person who becomes a shareholder by a transfer of shares succeeds to all rights of the former holder of those shares, by reason of that ownership. (V.T.I.C. Art. 3.05, Subsec. (a) (part).)
Sec. 841.255. ANNUAL STATEMENT; FILING FEE. (a) Not later than March 1 of each year, a domestic insurance company shall:
(1) prepare a statement showing the condition of the company on December 31 of the preceding year; and
(2) deliver the statement to the department accompanied by a filing fee in the amount determined under Article 4.07.
(b) The statement must be under oath of two of the domestic insurance company's officers and show in detail:
(1) the character of the company's assets and liabilities on December 31 of the preceding year;
(2) the amount and character of business transacted and money received during the preceding year;
(3) how money was spent during the preceding year;
(4) the number and amount of the company's policies in force in this state on that date; and
(5) the total amount of the company's policies in force on that date. (V.T.I.C. Art. 3.07.)
Sec. 841.256. BUSINESS IN SEPARATE DEPARTMENTS OF DOMESTIC INSURANCE COMPANY. A domestic insurance company may not transact more than one of the kinds of insurance business described by Section 841.051(a) unless the company establishes separate departments to transact each kind of business. (V.T.I.C. Art. 3.02, Sec. 1(a) (part).)
Sec. 841.257. KINDS OF BUSINESS LIMITED. An insurance company authorized to engage in the business of insurance under this chapter may not accept a risk or write an insurance policy in this state or any other state or country other than:
(1) a life, accident, or health insurance policy;
(2) reinsurance under Article 5.75-1 by a life insurance company authorized to engage in the business of insurance in this state; or
(3) reinsurance under Article 5.75-3 by a domestic insurance company. (V.T.I.C. Art. 3.54.)
Sec. 841.258. AGENTS FOR COMPANY THAT CEASES WRITING NEW BUSINESS. A domestic insurance company that ceases to write new business in this state may maintain in this state agents to collect renewal premiums on outstanding policies the company has written under its certificate of authority. (V.T.I.C. Art. 3.58.)
Sec. 841.259. PROHIBITED ACTIVITIES OF DIRECTORS AND OFFICERS. (a) A director or officer of an insurance company may not:
(1) receive money or another valuable thing for negotiating, procuring, recommending, or aiding in a purchase or sale of property by or a loan from the company; or
(2) have a pecuniary interest, as a principal, coprincipal, agent, or beneficiary, in a purchase, sale, or loan described by Subdivision (1).
(b) This section does not prohibit:
(1) a life insurance company from making a loan to a policyholder in an amount that is not greater than the reserve value of the policy; or
(2) a transaction, purchase, sale, or loan approved by the commissioner under Subchapter A of Chapter 805 or Chapter 823. (V.T.I.C. Art. 3.67.)
Sec. 841.260. PROHIBITED COMMISSIONS. (a) In this section, "contingent compensation" means a commission or other compensation an insurance company pays to a person that is contingent on:
(1) the writing or procurement of an insurance policy in the company;
(2) the procurement of an application for an insurance policy in the company;
(3) the payment of a renewal premium; or
(4) the assumption of an insurance risk by the company.
(b) A life insurance company that engages in the business of insurance in this state may not, directly or indirectly, pay or contract to pay a contingent compensation to:
(1) the president, vice president, secretary, or treasurer of the company;
(2) any other officer of the company, other than an agent or solicitor;
(3) an actuary of the company; or
(4) a medical director or other physician of the company whose duty is to examine risks or applications for insurance for the company.
(c) This section does not prohibit a plan of compensation to a marketing officer according to the total amount of insurance the insurance company writes or to the total amount of insurance in force with the insurance company during a specified period if:
(1) the commissioner approves the plan under Subchapter A, Chapter 805;
(2) the marketing officer is not responsible for underwriting, rating, or otherwise approving the acceptability of insurance risks; and
(3) the plan does not compensate the marketing officer according to commissions on individual sales of any insurance product. (V.T.I.C. Art. 3.68 (part).)
Sec. 841.261. CAUSES OF ACTION. (a) A domestic insurance company may bring an action against any person, including a policyholder or shareholder of the company, for any cause related to the company's business.
(b) A policyholder or an heir or legal representative of a policyholder may bring an action against a domestic insurance company for a loss that accrues on a policy.
(c) An action enjoining, restraining, or interfering with the prosecution of a domestic insurance company's business may be brought only by the department. (V.T.I.C. Art. 3.63.)
[Sections 841.262-841.300 reserved for expansion]
SUBCHAPTER G. PROHIBITIONS AND RESTRICTIONS
ON ISSUANCE OF POLICIES
Sec. 841.301. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE POLICIES. (a) A domestic insurance company may not assume liability on or indemnify one person for any risk under one or more accident, health, or hospitalization insurance policies, or a combination of those policies, in an amount that exceeds $10,000, unless the amount of the issued, outstanding, and stated capital of the company is at least equal to the minimum amount of capital required for a newly incorporated company under Section 841.054.
(b) A domestic insurance company that before January 1, 2002, ceases to assume liability on, or indemnify any risk under, a policy described by Subsection (a) in the amount specified by Subsection (a) and notifies the commissioner of that action is exempt from the requirements of Subsection (a) until the date the company resumes writing those policies. A company that resumes assuming liability on or indemnifying risks under those policies shall comply with Subsections (a) and (c).
(c) A domestic insurance company that is exempt under Subsection (b) shall maintain its issued, outstanding, and stated capital in an amount that is at least $100,000 and is at least:
(1) the amount of capital held by the company on December 31, 1991, plus 10 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1993;
(2) the amount of capital held by the company on December 31, 1991, plus 20 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1994;
(3) the amount of capital held by the company on December 31, 1991, plus 30 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1995;
(4) the amount of capital held by the company on December 31, 1991, plus 40 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1996;
(5) the amount of capital held by the company on December 31, 1991, plus 50 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1997;
(6) the amount of capital held by the company on December 31, 1991, plus 60 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1998;
(7) the amount of capital held by the company on December 31, 1991, plus 70 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 1999;
(8) the amount of capital held by the company on December 31, 1991, plus 80 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 2000; and
(9) the amount of capital held by the company on December 31, 1991, plus 90 percent of the difference between that amount and an amount equal to the minimum amount of capital required for a newly incorporated company under Section 841.054, if the last date that the company writes a policy described by Subsection (a) is during 2001. (V.T.I.C. Art. 3.02, Secs. 2(c), (d).)
Sec. 841.302. LIMITS ON LIFE OR ACCIDENTAL DEATH INSURANCE. (a) Until the amount of the capital and surplus of a domestic insurance company is at least $100,000, the company may not insure any one life for more than $20,000 in the event of death from natural causes or more than $40,000 in the event of death from accidental causes.
(b) If the net capital and surplus of a domestic insurance company is at least $75,001 but less than $100,000, the company, for any policy issued by the company, shall reinsure the amount of the benefit that exceeds $4,000 in the event of death from natural causes and the amount of the benefit that exceeds $8,000 in the event of death from accidental causes.
(c) If the net capital and surplus of a domestic insurance company is at least $50,001 but less than $75,001, the company, for any policy issued by the company, shall reinsure the amount of the benefit that exceeds $3,000 in the event of death from natural causes and the amount of the benefit that exceeds $6,000 in the event of death from accidental causes.
(d) If the net capital and surplus of a domestic insurance company is at least $35,001 but less than $50,001, the company, for any policy issued by the company, shall reinsure the amount of the benefit that exceeds $2,000 in the event of death from natural causes and the amount of the benefit that exceeds $4,000 in the event of death from accidental causes.
(e) If the net capital and surplus of a domestic insurance company is $35,000 or less, the company, for any policy issued by the company, shall reinsure the amount of the benefit that exceeds $1,000 in the event of death from natural causes and the amount of the benefit that exceeds $2,000 in the event of death from accidental causes.
(f) Benefits under this section must be reinsured with a legal reserve company that is authorized to engage in the business of insurance in this state. (V.T.I.C. Art. 3.02, Sec. 2(b).)
[Sections 841.303-841.350 reserved for expansion]
SUBCHAPTER H. DEPOSIT OF SECURITIES
Sec. 841.351. DEPOSIT WITH COMPTROLLER. (a) A domestic insurance company may, at its option, deposit with the comptroller either:
(1) securities in which the company's capital stock is invested; or
(2) securities in an amount equal to the amount of the company's capital stock.
(b) Securities deposited under Subsection (a) must be securities of a class authorized by the laws of this state for investments of a domestic insurance company's capital stock.
(c) A domestic insurance company may, at its option, withdraw a deposit made under Subsection (a), or any portion of the deposit, after substituting a deposit of securities of a like class and of an amount and value equal to the withdrawn deposit or portion of deposit.
(d) The commissioner must first approve any securities deposited or being substituted under this section. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
Sec. 841.352. ISSUANCE OF RECEIPT FOR DEPOSIT. When a domestic insurance company deposits securities under this subchapter, the comptroller shall issue to the company a receipt that:
(1) describes the deposit in a manner that identifies the securities; and
(2) states that the securities are held on deposit as capital stock investments of the company. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
Sec. 841.353. ADVERTISEMENT OF DEPOSIT. A domestic insurance company that makes a deposit under this subchapter may:
(1) advertise the fact that a deposit has been made; or
(2) print a copy of the receipt for the deposit on any policy the company issues. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
Sec. 841.354. ACCESS TO DEPOSIT. In accordance with reasonable rules adopted by the comptroller and the commissioner, the proper officer or agent of a domestic insurance company making a deposit of securities under this subchapter may at a reasonable time:
(1) examine the deposit;
(2) detach coupons from the securities; and
(3) collect interest on the deposit. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
Sec. 841.355. WITHDRAWAL OF DEPOSIT AFTER MERGER, CONSOLIDATION, OR TOTAL REINSURANCE. (a) When two or more domestic insurance companies that have two or more deposits of securities under this subchapter merge, consolidate, or enter into a total reinsurance contract by which the ceding company is dissolved and its assets and liabilities are acquired or assumed by the surviving company, the new, surviving, or reinsuring insurance company, on approval of the commissioner, may withdraw all of the deposits, except for the deposit of the greatest amount and value. The new, surviving, or reinsuring insurance company must demonstrate to the commissioner that the company is the owner of the deposited securities before the commissioner approves the withdrawal of those securities.
(b) In accordance with an order of the commissioner approving a withdrawal of securities under this section, the comptroller shall release, transfer, and deliver the withdrawn securities to their owner. (V.T.I.C. Art. 3.15, Subsec. (b).)
Sec. 841.356. SITUS OF DEPOSIT FOR TAX PURPOSES. For purposes of state, county, or municipal taxation, the situs of deposited securities is the municipality and county in which the depositing company's home office is located. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
Sec. 841.357. MAINTENANCE OF DEPOSIT. A domestic insurance company must maintain a deposit of securities under this subchapter as long as the company has outstanding any liability to a policyholder in this state. (V.T.I.C. Art. 3.15, Subsec. (a) (part).)
[Sections 841.358-841.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT AND INTERVENTION
Sec. 841.701. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) If the commissioner determines that an insurance company that holds a certificate of authority does not comply with this chapter or another law described by Section 841.002, the commissioner shall notify the company that the commissioner intends to revoke its certificate of authority on the expiration of the 30-day period after the date actual notice is delivered or mailed under this section.
(b) Notice under this section must:
(1) be in writing; and
(2) be delivered to an executive officer of the company by personal service or by registered mail.
(c) If an insurance company receiving notice under this section does not fully comply before the expiration of the period prescribed by Subsection (a), the commissioner shall revoke the company's certificate of authority.
(d) An insurance company whose certificate of authority is revoked under this section is not entitled to receive another certificate of authority for a period of one year and until the company has fully and in good faith complied with this chapter. (V.T.I.C. Art. 3.55 (part).)
Sec. 841.702. APPEAL OF DETERMINATION TO REVOKE CERTIFICATE. A domestic insurance company aggrieved by an order of the commissioner to revoke the company's certificate of authority under Section 841.701 may file suit in a court in Travis County to vacate the order. (V.T.I.C. Art. 3.55 (part).)
Sec. 841.703. CERTIFICATE OF AUTHORITY VOID ON FAILURE TO SATISFY JUDGMENT. (a) If an officer holding an execution issued on a final judgment rendered against an insurance company demands payment of the judgment from an officer or attorney of record of the company and the company does not fully satisfy the judgment before the 31st day after the date the demand is made, the officer shall certify the demand and failure to the commissioner, regardless of whether the demand is made in this state.
(b) On receipt of a certification under Subsection (a), the commissioner shall declare void the certificate of authority issued to the company under this chapter.
(c) An insurance company whose certificate of authority is declared void under this section may not engage in the business of insurance in this state until:
(1) the judgment is fully satisfied and discharged; and
(2) the commissioner renews the company's certificate of authority. (V.T.I.C. Art. 3.61.)
Sec. 841.704. FALSE STATEMENT, REPORT, OR OTHER DOCUMENT; CRIMINAL PENALTY. (a) A person commits an offense if the person executes or causes to be executed a statement, report, or other document required by law to be filed with the commissioner that contains a material statement or fact that the person knows to be false.
(b) A person commits an offense if the person is an officer of an insurance company that is not organized under the laws of this state and the person files a statement, report, or other document required by law to be filed with the commissioner that contains a material statement or fact that the person knows to be false.
(c) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not less than one year. (V.T.I.C. Art. 3.56-1.)
CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 842.001. DEFINITIONS
Sec. 842.002. APPLICABILITY OF OTHER LAWS
Sec. 842.003. CORPORATION SUBJECT TO REGULATION BY COMMISSIONER
AND DEPARTMENT
[Sections 842.004-842.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF GROUP
HOSPITAL SERVICE CORPORATION
Sec. 842.051. APPLICATION FOR CORPORATE CHARTER; NONPROFIT
STATUS REQUIRED
Sec. 842.052. MINIMUM MEMBERSHIP REQUIREMENTS
[Sections 842.053-842.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 842.101. ISSUANCE OF CERTIFICATE OF AUTHORITY
[Sections 842.102-842.150 reserved for expansion]
SUBCHAPTER D. BOARD OF DIRECTORS; PERSONNEL
Sec. 842.151. BOARD OF DIRECTORS
Sec. 842.152. COMPENSATION OF DIRECTORS
Sec. 842.153. BOARD MEETINGS
Sec. 842.154. BOND REQUIREMENTS FOR CERTAIN OFFICERS AND EMPLOYEES
Sec. 842.155. TREASURER'S BOND
Sec. 842.156. COMPENSATION OF CERTAIN OFFICERS AND
EMPLOYEES
[Sections 842.157-842.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF GROUP HOSPITAL SERVICE CORPORATIONS
Sec. 842.201. ANNUAL OPERATING STATEMENT; FILING FEE
Sec. 842.202. RESERVE REQUIREMENTS
Sec. 842.203. FINAL JUDGMENT DEPOSIT
Sec. 842.204. INVESTMENT LIMITATIONS
Sec. 842.205. INCURRED EXPENSES
Sec. 842.206. MINIMUM SURPLUS REQUIREMENT
Sec. 842.207. CONTRACTS; REINSURANCE; OTHER AGREEMENTS
Sec. 842.208. BOOKS AND RECORDS
Sec. 842.209. EXAMINATIONS
Sec. 842.210. LIQUIDATION, REHABILITATION, OR CONSERVATION OF
GROUP HOSPITAL SERVICE CORPORATION
[Sections 842.211-842.250 reserved for expansion]
SUBCHAPTER F. PLAN OF OPERATION; PROVISION OF BENEFITS
TO MEMBERS
Sec. 842.251. PLAN OF OPERATION
Sec. 842.252. MEMBERSHIP CERTIFICATE; CONTRACT
Sec. 842.253. POLICY, CERTIFICATE, AND APPLICATION FORMS
Sec. 842.254. DEPOSIT REQUIREMENTS
Sec. 842.255. ADVANCE PAYMENTS TO HOSPITAL PROHIBITED
Sec. 842.256. CONTRACTS WITH HEALTH CARE PROVIDERS
Sec. 842.257. MAY LIMIT BENEFITS
Sec. 842.258. LIMITATIONS ON CONTRACTS FOR MEDICAL SERVICES
Sec. 842.259. USE OF INDEMNITY PLAN AUTHORIZED
Sec. 842.260. PAYMENT OF CLAIM; PROOF OF CLAIM
[Sections 842.261-842.300 reserved for expansion]
SUBCHAPTER G. DISCIPLINARY PROCEDURES
Sec. 842.301. REVOCATION OF CERTIFICATE OF AUTHORITY
CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 842.001. DEFINITIONS. In this chapter:
(1) "Group hospital service corporation" means a corporation organized under this chapter to establish and operate a nonprofit hospital service plan, under which hospital care may be provided by the corporation through one or more hospitals and sanitariums with which the corporation has contracted for the provision of that care.
(2) "Health care provider" means a person, association, partnership, corporation, or other entity that provides a service or supplies to prevent, alleviate, cure, or heal human illness or injury. (V.T.I.C. Arts. 20.01 (part); 20.11 (part).)
Sec. 842.002. APPLICABILITY OF OTHER LAWS. (a) Except as otherwise required by this chapter, a state agency may not require a group hospital service corporation to post a bond or place a deposit with the agency or another agency of this state to begin or maintain operations authorized under this chapter.
(b) The group hospital service corporation is exempt from a provision of this code that is not expressly made applicable to the corporation. (V.T.I.C. Art. 20.09.)
Sec. 842.003. CORPORATION SUBJECT TO REGULATION BY COMMISSIONER AND DEPARTMENT. Each group hospital service corporation is subject to regulation by the department and the commissioner. (V.T.I.C. Art. 20.02 (part).)
[Sections 842.004-842.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF GROUP
HOSPITAL SERVICE CORPORATION
Sec. 842.051. APPLICATION FOR CORPORATE CHARTER; NONPROFIT STATUS REQUIRED. (a) Seven or more persons, a majority of whom are superintendents of hospitals or physicians licensed by the Texas State Board of Medical Examiners, may apply to the secretary of state for a corporate charter to operate a group hospital service corporation.
(b) A group hospital service corporation must be governed and operated as a nonprofit organization. (V.T.I.C. Arts. 20.01 (part); 20.10 (part).)
Sec. 842.052. MINIMUM MEMBERSHIP REQUIREMENTS. (a) Before a group hospital service corporation may be incorporated, the corporation must have collected in advance from at least 500 applicants for membership:
(1) the application fee; and
(2) an amount at least equal to the amount charged by the corporation for one month's premium for coverage.
(b) A group hospital service corporation must maintain a membership of at least 500 as a condition of continued operation. (V.T.I.C. Art. 20.02 (part).)
[Sections 842.053-842.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 842.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The department shall issue to a group hospital service corporation a certificate of authority that authorizes the corporation to engage in the business of a group hospital service corporation if the corporation:
(1) files a statement acceptable to the department showing solvency; and
(2) complies with this chapter.
(b) The department shall charge the fee prescribed by law for the issuance of the certificate of authority. (V.T.I.C. Arts. 20.02 (part); 20.08 (part).)
[Sections 842.102-842.150 reserved for expansion]
SUBCHAPTER D. BOARD OF DIRECTORS; PERSONNEL
Sec. 842.151. BOARD OF DIRECTORS. (a) Each group hospital service corporation is governed by a board of directors that has full control over its management affairs.
(b) A board of directors must be composed of at least 12 but not more than 20 directors. A majority of the directors must be persons who:
(1) are not health care providers or employees of health care providers; and
(2) do not have a financial interest in a health care provider. (V.T.I.C. Art. 20.13.)
Sec. 842.152. COMPENSATION OF DIRECTORS. A director of a group hospital service corporation may not receive compensation for the director's services but is entitled to receive reimbursement for reasonable and necessary expenses incurred in attending a meeting called to manage or direct the affairs of the corporation. (V.T.I.C. Art. 20.20 (part).)
Sec. 842.153. BOARD MEETINGS. The board of directors of a group hospital service corporation may not meet more frequently than once a month. A meeting may not last more than five days. (V.T.I.C. Art. 20.20 (part).)
Sec. 842.154. BOND REQUIREMENTS FOR CERTAIN OFFICERS AND EMPLOYEES. (a) Each group hospital service corporation shall post a bond for the officer or employee responsible for the handling of the corporation's money. The bond must be:
(1) issued by a surety company licensed by the department to do business in this state; and
(2) at all times in an amount at least equal to $25,000.
(b) In addition to the bond required under Subsection (a), the corporation shall post a separate bond or a blanket bond for all employees who have access to the money of the corporation. The bond must be in a reasonable amount set by the commissioner in the amount of at least $500, not to exceed $10,000.
(c) A bond required by this section must be payable to the commissioner for the use and benefit of the corporation. (V.T.I.C. Art. 20.04.)
Sec. 842.155. TREASURER'S BOND. The treasurer of each group hospital service corporation shall post a fidelity bond with a corporation surety. The bond must be in the amount determined by the officers of the corporation as necessary to secure the faithful handling of the corporation's money. (V.T.I.C. Art. 20.17 (part).)
Sec. 842.156. COMPENSATION OF CERTAIN OFFICERS AND EMPLOYEES. A paid officer or employee of a group hospital service corporation may not receive more than $20,000 annually as compensation for the officer's or employee's services unless a higher amount is first authorized by a vote of:
(1) the board of directors of the corporation; or
(2) a committee of the board of directors that is charged with the duty of authorizing that compensation. (V.T.I.C. Art. 20.10 (part).)
[Sections 842.157-842.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF GROUP HOSPITAL
SERVICE CORPORATIONS
Sec. 842.201. ANNUAL STATEMENT; FILING FEE. (a) Not later than March 1 of each year, each group hospital service corporation shall file with the department an annual statement that covers the operations for the preceding calendar year.
(b) The statement must be in the form prescribed by and provide the information required by the commissioner.
(c) The department shall charge a fee in an amount determined under Article 4.07 for filing the statement. (V.T.I.C. Arts. 20.02 (part); 20.08 (part).)
Sec. 842.202. RESERVE REQUIREMENTS. (a) Each group hospital service corporation shall maintain reserves sufficient to cover liability for claims incurred but not yet paid and the expenses incurred in settling those claims.
(b) A group hospital service corporation shall estimate the amount necessary to satisfy the reserve requirements using a method submitted to the commissioner for approval. The estimate method used by the corporation is considered approved on the 30th day after the date filed with the commissioner unless the commissioner affirmatively approves or disapproves the method before that date. (V.T.I.C. Art. 20.02 (part).)
Sec. 842.203. FINAL JUDGMENT DEPOSIT. (a) For each 1,000 members and fraction of 1,000 members, a group hospital service corporation shall deposit $100 with the comptroller through the commissioner. The total deposit required under this subsection may not exceed $2,000.
(b) The deposit required under Subsection (a) shall be used to pay any judgment entered against the group hospital service corporation and is subject to garnishment after a final judgment is entered.
(c) The group hospital service corporation shall immediately replenish the amount on deposit if the amount is impounded or impaired. If the amount is not replenished immediately on the demand of the commissioner, the corporation may be regarded as insolvent and treated accordingly. (V.T.I.C. Art. 20.03.)
Sec. 842.204. INVESTMENT LIMITATIONS. The investment limitations that apply to a life, health, and accident insurance company apply to the investments of a group hospital service corporation. (V.T.I.C. Art. 20.10 (part).)
Sec. 842.205. INCURRED EXPENSES. (a) In this section, "general expenses" means expenses incurred by a group hospital service corporation in the operation of its business other than:
(1) a tax;
(2) a license fee;
(3) a commission; or
(4) an expense incurred in the performance of a contract:
(A) made directly or indirectly with this state or the United States; and
(B) under which the corporation does not assume an insurance risk.
(b) Subject to Subsection (c), a group hospital service corporation may not incur during a calendar year general expenses that exceed 20 percent of the premiums earned in that calendar year.
(c) For a group hospital service corporation earning $500 million or more in premiums in a calendar year, the maximum percentage of general expenses that may be incurred during a calendar year is reduced by one-half percent for each $50 million of premiums earned to a maximum percentage of 15 percent. (V.T.I.C. Art. 20.10 (part).)
Sec. 842.206. MINIMUM SURPLUS REQUIREMENT. Each group hospital service corporation shall maintain a surplus of at least $100,000 to meet adverse contingencies. (V.T.I.C. Art. 20.15.)
Sec. 842.207. CONTRACTS; REINSURANCE; OTHER AGREEMENTS. (a) Subject to Subsection (b), a group hospital service corporation may:
(1) contract with another organization similar in character for joint participation through:
(A) a mutualization contract agreement;
(B) a reinsurance treaty; or
(C) another arrangement; and
(2) cede or accept risks from an insurer on all or part of a risk.
(b) Each document used for a purpose described by Subsection (a) must be filed with the department and approved by the commissioner for use in that purpose. (V.T.I.C. Art. 20.19.)
Sec. 842.208. BOOKS AND RECORDS. Each group hospital service corporation shall keep complete books and records. (V.T.I.C. Art. 20.21(a).)
Sec. 842.209. EXAMINATIONS. Articles 1.15 and 1.16 apply to a group hospital service corporation. (V.T.I.C. Art. 20.21(b).)
Sec. 842.210. LIQUIDATION, REHABILITATION, OR CONSERVATION OF GROUP HOSPITAL SERVICE CORPORATION. The dissolution, liquidation, rehabilitation, or conservation of a group hospital service corporation is subject to Articles 21.28 and 21.28-A. (V.T.I.C. Art. 20.06.)
[Sections 842.211-842.250 reserved for expansion]
SUBCHAPTER F. PLAN OF OPERATION; PROVISION OF
BENEFITS TO MEMBERS
Sec. 842.251. PLAN OF OPERATION. (a) Before accepting applications for membership in its hospital service plan, a group hospital service corporation must submit to the commissioner a plan of operation. The plan of operation must be accompanied by a schedule of the dues to be charged to members and a statement of the amount of hospital services that the corporation contracts to provide.
(b) The commissioner must approve the plan of operation as fair and reasonable before the corporation may engage in business. (V.T.I.C. Art. 20.14.)
Sec. 842.252. MEMBERSHIP CERTIFICATE; CONTRACT. (a) A group hospital service corporation shall issue to each member a membership certificate that states the benefits to which the member is or may become entitled.
(b) The department must approve the form of:
(1) the membership certificate; and
(2) any contract made between the group hospital service corporation and the member's employer or group representative. (V.T.I.C. Art. 20.16.)
Sec. 842.253. POLICY, CERTIFICATE, AND APPLICATION FORMS. A policy, certificate, or application form used by a group hospital service corporation is subject to Article 3.42. (V.T.I.C. Art. 20.02(e).)
Sec. 842.254. DEPOSIT REQUIREMENTS. A group hospital service corporation shall deposit in the account of the corporation in a bank money collected by the corporation from a member or subscriber. The bank must be a state depository. (V.T.I.C. Art. 20.17 (part).)
Sec. 842.255. ADVANCE PAYMENTS TO HOSPITAL PROHIBITED. A group hospital service corporation may not pay to a hospital any money collected by the corporation from a member or subscriber before the hospital provides necessary care to that member or subscriber. (V.T.I.C. Art. 20.18.)
Sec. 842.256. CONTRACTS WITH HEALTH CARE PROVIDERS. (a) A group hospital service corporation may contract with health care providers as necessary to ensure to each member or subscriber the provision of services and supplies covered by the membership certificate or policy of the corporation.
(b) A group hospital service corporation may not be required to contract with any particular health care provider.
(c) This section does not authorize a group hospital service corporation to contract with a health care provider in a manner prohibited by a licensing law of this state under which that health care provider operates. (V.T.I.C. Art. 20.11 (part).)
Sec. 842.257. MAY LIMIT BENEFITS. A policy issued by a group hospital service corporation may limit the types of disease for which benefits are provided. (V.T.I.C. Art. 20.11 (part).)
Sec. 842.258. LIMITATIONS ON CONTRACTS FOR MEDICAL SERVICES. (a) A group hospital service corporation may not:
(1) contract to provide to a member a physician or any medical services;
(2) contract to practice medicine in any manner;
(3) control or attempt to control the relations existing between a member and the member's physician; or
(4) restrict the right of a patient to obtain the services of any licensed physician.
(b) This section does not prohibit a group hospital service corporation from contracting with:
(1) a health organization certified under Chapter 162, Occupations Code; or
(2) a physician or other health care provider under rules adopted for preferred provider plans. (V.T.I.C. Art. 20.12 (part).)
Sec. 842.259. USE OF INDEMNITY PLAN AUTHORIZED. A group hospital service corporation may provide benefits for medical care, surgical care, or both medical and surgical care on the basis of indemnity payments for incurred expenses. (V.T.I.C. Art. 20.12 (part).)
Sec. 842.260. PAYMENT OF CLAIM; PROOF OF CLAIM. (a) After receipt of due proof of claim, a group hospital service corporation shall pay each claim presented under a membership certificate in full not later than the 60th day after the date on which the applicable services prescribed in the certificate have been provided.
(b) Written notice of a claim given to a group hospital service corporation is considered due proof of claim under this section if the corporation does not provide the claimant with the forms usually provided by the corporation for filing a claim before the 16th day after the date notice is received. (V.T.I.C. Art. 20.05 (part).)
[Sections 842.261-842.300 reserved for expansion]
SUBCHAPTER G. DISCIPLINARY PROCEDURES
Sec. 842.301. REVOCATION OF CERTIFICATE OF AUTHORITY. The commissioner shall revoke the certificate of authority of a group hospital service corporation that:
(1) is determined to be:
(A) operating fraudulently; or
(B) improperly contesting claims; or
(2) fails to pay valid claims in accordance with this chapter. (V.T.I.C. Art. 20.05 (part).)
CHAPTER 843. HEALTH MAINTENANCE ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 843.001. SHORT TITLE
Sec. 843.002. DEFINITIONS
Sec. 843.003. POWERS OF INSURERS AND GROUP HOSPITAL SERVICE
CORPORATIONS
Sec. 843.004. GOVERNING BODY OF HEALTH MAINTENANCE ORGANIZATION
Sec. 843.005. USE OF INSURANCE-RELATED TERMS BY HEALTH
MAINTENANCE ORGANIZATION
Sec. 843.006. PUBLIC DOCUMENTS
Sec. 843.007. CONFIDENTIALITY OF MEDICAL AND HEALTH INFORMATION
Sec. 843.008. COSTS OF ADMINISTERING HEALTH MAINTENANCE
ORGANIZATION LAWS
Sec. 843.009. APPEALS; JUDICIAL REVIEW
[Sections 843.010-843.050 reserved for expansion]
SUBCHAPTER B. APPLICABILITY OF AND CONSTRUCTION WITH
OTHER LAWS
Sec. 843.051. APPLICABILITY OF INSURANCE AND GROUP HOSPITAL
SERVICE CORPORATION LAWS
Sec. 843.052. LAWS RELATING TO SOLICITATION OR ADVERTISING
Sec. 843.053. LAWS RELATING TO RESTRAINT OF TRADE
Sec. 843.054. LAWS REQUIRING CERTIFICATE OF NEED FOR HEALTH
CARE FACILITY OR SERVICE
Sec. 843.055. LAWS RELATING TO PRACTICE OF MEDICINE
Sec. 843.056. INAPPLICABILITY OF BANKRUPTCY LAW
[Sections 843.057-843.070 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 843.071. CERTIFICATE OF AUTHORITY REQUIRED; USE OF
"HEALTH MAINTENANCE ORGANIZATION" OR "HMO"
Sec. 843.072. AUTHORIZATION REQUIRED TO ACT AS HEALTH
MAINTENANCE ORGANIZATION
Sec. 843.073. CERTIFICATE OF AUTHORITY REQUIREMENT:
APPLICABILITY TO PHYSICIANS AND PROVIDERS
Sec. 843.074. CERTIFICATE OF AUTHORITY REQUIREMENT:
APPLICABILITY TO MEDICAL SCHOOL AND MEDICAL
AND DENTAL UNIT
Sec. 843.075. CERTIFICATE OF AUTHORITY FOR SINGLE
HEALTH CARE SERVICE PLAN
Sec. 843.076. APPLICATION
Sec. 843.077. ELIGIBILITY OF FOREIGN CORPORATION
Sec. 843.078. CONTENTS OF APPLICATION
Sec. 843.079. CONTENTS OF APPLICATION: LIMITED HEALTH CARE
SERVICE PLAN
Sec. 843.080. MODIFICATION OR AMENDMENT OF APPLICATION
INFORMATION
Sec. 843.081. DEADLINE FOR ACTION ON APPLICATION
Sec. 843.082. APPROVAL OF APPLICATION
Sec. 843.083. DENIAL OF CERTIFICATE OF AUTHORITY
Sec. 843.084. DURATION OF CERTIFICATE OF AUTHORITY
Sec. 843.085. CHANGE IN CONTROL: COMMISSIONER APPROVAL
[Sections 843.086-843.100 reserved for expansion]
SUBCHAPTER D. GENERAL POWERS AND DUTIES OF
HEALTH MAINTENANCE ORGANIZATIONS
Sec. 843.101. PROVIDING OR ARRANGING FOR CARE
Sec. 843.102. HEALTH MAINTENANCE ORGANIZATION QUALITY
ASSURANCE
Sec. 843.103. ACQUISITION AND OPERATION OF FACILITIES; CERTAIN
LOANS; COMMISSIONER APPROVAL OF AFFILIATE
TRANSACTIONS
Sec. 843.104. CONTRACTS FOR CERTAIN ADMINISTRATIVE
FUNCTIONS
Sec. 843.105. MANAGEMENT AND EXCLUSIVE AGENCY CONTRACTS
Sec. 843.106. INSURANCE, REINSURANCE, INDEMNITY, AND
REIMBURSEMENT
Sec. 843.107. INDEMNITY BENEFITS; POINT-OF-SERVICE
PROVISIONS
Sec. 843.108. POINT-OF-SERVICE RIDER
Sec. 843.109. PAYMENT BY GOVERNMENTAL OR PRIVATE ENTITY
Sec. 843.110. CORPORATION, PARTNERSHIP, OR ASSOCIATION
POWERS
Sec. 843.111. GROUP MODEL HEALTH MAINTENANCE ORGANIZATIONS
Sec. 843.112. DENTAL POINT-OF-SERVICE OPTION
Sec. 843.113. SPECIFIED POWERS NOT EXCLUSIVE
[Sections 843.114-843.150 reserved for expansion]
SUBCHAPTER E. REGULATION OF HEALTH MAINTENANCE ORGANIZATIONS
Sec. 843.151. RULES
Sec. 843.152. SUBPOENA AUTHORITY
Sec. 843.153. AUTHORITY TO CONTRACT
Sec. 843.154. FEES
Sec. 843.155. ANNUAL REPORT
Sec. 843.156. EXAMINATIONS
Sec. 843.157. REHABILITATION, LIQUIDATION, SUPERVISION, OR
CONSERVATION OF HEALTH MAINTENANCE ORGANIZATION
[Sections 843.158-843.200 reserved for expansion]
SUBCHAPTER F. RELATIONS WITH ENROLLEES AND GROUP
CONTRACT HOLDERS
Sec. 843.201. DISCLOSURE OF INFORMATION ABOUT HEALTH CARE
PLAN TERMS
Sec. 843.202. DISCLOSURE OF INFORMATION TO MEDICARE RECIPIENTS
Sec. 843.203. SELECTION OF PRIMARY CARE PHYSICIAN OR PROVIDER
Sec. 843.204. UNTRUE OR MISLEADING INFORMATION
Sec. 843.205. MEMBER'S HANDBOOK; INFORMATION ABOUT
COMPLAINTS AND APPEALS
Sec. 843.206. NOTICE OF CHANGE IN PAYMENT ARRANGEMENTS
Sec. 843.207. NOTICE OF CHANGE IN OPERATIONS
Sec. 843.208. CANCELLATION OR NONRENEWAL OF COVERAGE
[Sections 843.209-843.250 reserved for expansion]
SUBCHAPTER G. DISPUTE RESOLUTION
Sec. 843.251. COMPLAINT SYSTEM REQUIRED; COMMISSIONER
RULES AND EXAMINATION
Sec. 843.252. COMPLAINT INITIATION AND INITIAL RESPONSE;
DEADLINES FOR RESPONSE AND RESOLUTION
Sec. 843.253. COMPLAINT INVESTIGATION AND RESOLUTION
Sec. 843.254. APPEAL TO COMPLAINT APPEAL PANEL; DEADLINES
Sec. 843.255. COMPOSITION OF COMPLAINT APPEAL PANEL
Sec. 843.256. INFORMATION PROVIDED TO COMPLAINANT
RELATING TO COMPLAINT APPEAL PANEL
Sec. 843.257. RIGHTS OF COMPLAINANT AT COMPLAINT APPEAL
PANEL MEETING
Sec. 843.258. APPEAL INVOLVING ONGOING EMERGENCY OR
CONTINUED HOSPITALIZATION
Sec. 843.259. NOTICE OF DECISION ON APPEAL
Sec. 843.260. RECORD OF COMPLAINTS
Sec. 843.261. SPECIAL PROVISIONS FOR APPEALS OF ADVERSE
DETERMINATIONS
[Sections 843.262-843.280 reserved for expansion]
SUBCHAPTER H. GENERAL PROVISIONS REGARDING COMPLAINTS
Sec. 843.281. RETALIATORY ACTION PROHIBITED
Sec. 843.282. SUBMITTING COMPLAINTS TO DEPARTMENT
Sec. 843.283. POSTING OF INFORMATION ON COMPLAINT PROCESS
REQUIRED
[Sections 843.284-843.300 reserved for expansion]
SUBCHAPTER I. RELATIONS WITH PHYSICIANS AND PROVIDERS
Sec. 843.301. PRACTICE OF MEDICINE NOT AFFECTED
Sec. 843.302. DISCLOSURE OF APPLICATION PROCEDURES AND
QUALIFICATION REQUIREMENTS TO PHYSICIAN
OR PROVIDER
Sec. 843.303. DENIAL OF INITIAL CONTRACT TO PHYSICIAN OR
PROVIDER
Sec. 843.304. EXCLUSION OF PROVIDER BASED ON TYPE OF
LICENSE PROHIBITED
Sec. 843.305. ANNUAL APPLICATION PERIOD FOR PHYSICIANS
AND PROVIDERS TO CONTRACT
Sec. 843.306. TERMINATION OF PARTICIPATION; ADVISORY REVIEW
PANEL
Sec. 843.307. EXPEDITED REVIEW PROCESS ON TERMINATION OR
DESELECTION
Sec. 843.308. NOTIFICATION OF PATIENTS OF DESELECTED
PHYSICIAN OR PROVIDER
Sec. 843.309. CONTRACTS WITH PHYSICIANS OR PROVIDERS:
NOTICE TO CERTAIN ENROLLEES OF TERMINATION OF
PHYSICIAN OR PROVIDER PARTICIPATION IN PLAN
Sec. 843.310. CONTRACTS WITH PHYSICIANS OR PROVIDERS:
CERTAIN INDEMNITY CLAUSES PROHIBITED
Sec. 843.311. CONTRACTS WITH PODIATRISTS
Sec. 843.312. PHYSICIAN ASSISTANTS AND ADVANCED PRACTICE
NURSES
Sec. 843.313. ECONOMIC PROFILING
Sec. 843.314. INDUCEMENT TO LIMIT MEDICALLY
NECESSARY SERVICES PROHIBITED
Sec. 843.315. PAYMENT OF CAPITATION; ASSIGNMENT OF PRIMARY
CARE PHYSICIAN OR PROVIDER
Sec. 843.316. ALTERNATIVE CAPITATION SYSTEM
Sec. 843.317. EXCLUSION OF PHYSICIAN OR PROVIDER BASED ON
AFFILIATION WITH HEALTH MAINTENANCE
ORGANIZATION PROHIBITED
Sec. 843.318. CERTAIN CONTRACTS OF PARTICIPATING PHYSICIAN OR
PROVIDER NOT PROHIBITED
[Sections 843.319-843.335 reserved for expansion]
SUBCHAPTER J. PAYMENT OF CLAIMS TO PHYSICIANS AND PROVIDERS
Sec. 843.336. DEFINITION
Sec. 843.337. ACKNOWLEDGMENT OF RECEIPT OF CLAIM
Sec. 843.338. DEADLINE FOR ACTION ON CLEAN CLAIMS
Sec. 843.339. DEADLINE FOR ACTION ON CERTAIN PRESCRIPTION BENEFIT
CLAIMS
Sec. 843.340. AUDITED CLAIMS
Sec. 843.341. CLAIMS PROCESSING PROCEDURES
Sec. 843.342. VIOLATION OF CERTAIN CLAIMS PAYMENT PROVISIONS;
ADMINISTRATIVE PENALTY
Sec. 843.343. ATTORNEY'S FEES
Sec. 843.344. APPLICABILITY TO ENTITIES CONTRACTING WITH
HEALTH MAINTENANCE ORGANIZATION
Sec. 843.345. EXCEPTIONS
Sec. 843.346. PAYMENT OF CLAIMS
[Sections 843.347-843.360 reserved for expansion]
SUBCHAPTER K. RELATIONS BETWEEN ENROLLEE AND PHYSICIAN
OR PROVIDER
Sec. 843.361. ENROLLEES HELD HARMLESS
Sec. 843.362. CONTINUITY OF CARE; OBLIGATION OF
HEALTH MAINTENANCE ORGANIZATION
Sec. 843.363. PROTECTED PHYSICIAN OR PROVIDER COMMUNICATIONS
WITH PATIENTS
[Sections 843.364-843.400 reserved for expansion]
SUBCHAPTER L. FINANCIAL REGULATION OF HEALTH MAINTENANCE
ORGANIZATIONS
Sec. 843.401. FIDUCIARY RESPONSIBILITY
Sec. 843.402. OFFICERS' AND EMPLOYEES' BOND
Sec. 843.403. MINIMUM NET WORTH
Sec. 843.4031. PHASE-IN PERIOD FOR MINIMUM NET WORTH
Sec. 843.404. ADDITIONAL NET WORTH REQUIREMENTS
Sec. 843.405. DEPOSIT WITH COMPTROLLER
Sec. 843.406. HAZARDOUS FINANCIAL CONDITION
Sec. 843.407. RECEIVERSHIP AND DELINQUENCY PROCEEDINGS
Sec. 843.408. INSOLVENCY AND ALLOCATION TO OTHER HEALTH
MAINTENANCE ORGANIZATIONS
[Sections 843.409-843.434 reserved for expansion]
SUBCHAPTER M. HEALTH MAINTENANCE ORGANIZATION SOLVENCY
SURVEILLANCE COMMITTEE
Sec. 843.435. DEFINITION
Sec. 843.436. COMPOSITION AND ADMINISTRATION
Sec. 843.437. PLAN OF OPERATION
Sec. 843.438. EXAMINATION AND REGULATION
Sec. 843.439. IMMUNITY FROM LIABILITY
Sec. 843.440. GENERAL POWERS AND DUTIES
Sec. 843.441. ASSESSMENTS
[Sections 843.442-843.460 reserved for expansion]
SUBCHAPTER N. ENFORCEMENT
Sec. 843.461. ENFORCEMENT ACTIONS
Sec. 843.462. OPERATIONS DURING SUSPENSION OR AFTER REVOCATION
OF CERTIFICATE OF AUTHORITY
Sec. 843.463. INJUNCTIONS
Sec. 843.464. CRIMINAL PENALTY
CHAPTER 843. HEALTH MAINTENANCE ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 843.001. SHORT TITLE. This chapter may be cited as the Texas Health Maintenance Organization Act. (V.T.I.C. Art. 20A.01.)
Sec. 843.002. DEFINITIONS. In this chapter:
(1) "Adverse determination" means a determination by a health maintenance organization or a utilization review agent that health care services provided or proposed to be provided to an enrollee are not medically necessary or are not appropriate.
(2) "Basic health care services" means health care services that the commissioner determines an enrolled population might reasonably need to be maintained in good health, including, at a minimum, services designated as basic health services under Section 1302, Title XIII, Public Health Service Act (42 U.S.C. Section 300e-1(1)).
(3) "Blended contract" means a single document that provides a combination of indemnity and health maintenance organization benefits. The term includes a single contract policy, certificate, or evidence of coverage.
(4) "Capitation" means a method of compensating a physician or provider for arranging for or providing a defined set of covered health care services to certain enrollees for a specified period that is based on a predetermined payment per enrollee for the specified period, without regard to the quantity of services actually provided.
(5) "Complainant" means an enrollee, or a physician, provider, or other person designated to act on behalf of an enrollee, who files a complaint.
(6) "Complaint" means any dissatisfaction expressed orally or in writing by a complainant to a health maintenance organization regarding any aspect of the health maintenance organization's operation. The term includes dissatisfaction relating to plan administration, procedures related to review or appeal of an adverse determination under Section 843.261, the denial, reduction, or termination of a service for reasons not related to medical necessity, the manner in which a service is provided, and a disenrollment decision. The term does not include:
(A) a misunderstanding or a problem of misinformation that is resolved promptly by clearing up the misunderstanding or supplying the appropriate information to the satisfaction of the enrollee; or
(B) a provider's or enrollee's oral or written expression of dissatisfaction or disagreement with an adverse determination.
(7) "Emergency care" means health care services provided in a hospital emergency facility or comparable facility to evaluate and stabilize medical conditions of a recent onset and severity, including severe pain, that would lead a prudent layperson possessing an average knowledge of medicine and health to believe that the individual's condition, sickness, or injury is of such a nature that failure to get immediate medical care could:
(A) place the individual's health in serious jeopardy;
(B) result in serious impairment to bodily functions;
(C) result in serious dysfunction of a bodily organ or part;
(D) result in serious disfigurement; or
(E) for a pregnant woman, result in serious jeopardy to the health of the fetus.
(8) "Enrollee" means an individual who is enrolled in a health care plan and includes covered dependents.
(9) "Evidence of coverage" means any certificate, agreement, or contract, including a blended contract, that:
(A) is issued to an enrollee; and
(B) states the coverage to which the enrollee is entitled.
(10) "Group hospital service corporation" means a corporation operating under Chapter 842.
(11) "Health care" means prevention, maintenance, rehabilitation, pharmaceutical, and chiropractic services, other than medical care, provided by qualified persons.
(12) "Health care plan" means a plan:
(A) under which a person undertakes to provide, arrange for, pay for, or reimburse any part of the cost of health care services; and
(B) that consists in part of providing or arranging for health care services on a prepaid basis through insurance or otherwise, as distinguished from indemnifying for the cost of health care services.
(13) "Health care services" means services provided to an individual to prevent, alleviate, cure, or heal human illness or injury. The term includes:
(A) pharmaceutical services;
(B) medical, chiropractic, or dental care;
(C) hospitalization;
(D) care or services incidental to the health care services described by Paragraphs (A)-(C); and
(E) services provided under a limited health care service plan or a single health care service plan.
(14) "Health maintenance organization" means a person who arranges for or provides to enrollees on a prepaid basis a health care plan, a limited health care service plan, or a single health care service plan.
(15) "Health maintenance organization delivery network" means a health care delivery system in which a health maintenance organization arranges for health care services directly or indirectly through contracts and subcontracts with physicians and providers.
(16) "Life-threatening" means a disease or condition from which the likelihood of death is probable unless the course of the disease or condition is interrupted.
(17) "Limited health care service plan" means a plan:
(A) under which a person undertakes to provide, arrange for, pay for, or reimburse any part of the cost of limited health care services; and
(B) that consists in part of providing or arranging for limited health care services on a prepaid basis through insurance or otherwise, as distinguished from indemnifying for the cost of limited health care services.
(18) "Limited health care services" means:
(A) services for mental health, chemical dependency, or mental retardation, or any combination of those services; or
(B) an organized long-term care service delivery system that provides for diagnostic, preventive, therapeutic, rehabilitative, and personal care services required by an individual with a loss in functional capacity on a long-term basis.
(19) "Medical care" means the provision of those services defined as practicing medicine under Section 151.002, Occupations Code.
(20) "Net worth" means the amount by which total liabilities, excluding liability for subordinated debt issued in compliance with Article 1.39, is exceeded by total admitted assets.
(21) "Person" means any natural or artificial person, including an individual, partnership, association, corporation, organization, trust, hospital district, community mental health center, mental retardation center, mental health and mental retardation center, limited liability company, or limited liability partnership or the statewide rural health care system under Chapter 845.
(22) "Physician" means:
(A) an individual licensed to practice medicine in this state;
(B) a professional association organized under the Texas Professional Association Act (Article 1528f, Vernon's Texas Civil Statutes);
(C) an approved nonprofit health corporation certified under Chapter 162, Occupations Code;
(D) a medical school or medical and dental unit, as defined or described by Section 61.003, 61.501, or 74.601, Education Code, that employs or contracts with physicians to teach or provide medical services or employs physicians and contracts with physicians in a practice plan; or
(E) another person wholly owned by physicians.
(23) "Prospective enrollee" means:
(A) an individual eligible to enroll in a health maintenance organization purchased through a group of which the individual is a member; or
(B) for an individual who is not a member of a group or whose group has not purchased or does not intend to purchase a health maintenance organization's health care plan, an individual who has expressed an interest in purchasing individual health maintenance organization coverage and is eligible for coverage by a health maintenance organization.
(24) "Provider" means:
(A) a person, other than a physician, who is licensed or otherwise authorized to provide a health care service in this state, including:
(i) a chiropractor, registered nurse, pharmacist, optometrist, or registered optician; or
(ii) a pharmacy, hospital, or other institution or organization;
(B) a person who is wholly owned or controlled by a provider or by a group of providers who are licensed or otherwise authorized to provide the same health care service; or
(C) a person who is wholly owned or controlled by one or more hospitals and physicians, including a physician-hospital organization.
(25) "Single health care service" means a health care service:
(A) that an enrolled population may reasonably need to be maintained in good health with respect to a particular health care need to prevent, alleviate, cure, or heal human illness or injury of a single specified nature; and
(B) that is provided by one or more persons licensed or otherwise authorized by the state to provide that service.
(26) "Single health care service plan" means a plan:
(A) under which a person undertakes to provide, arrange for, pay for, or reimburse any part of the cost of a single health care service;
(B) that consists in part of providing or arranging for the single health care service on a prepaid basis through insurance or otherwise, as distinguished from indemnifying for the cost of that service; and
(C) that does not include arranging for the provision of more than one health care need of a single specified nature.
(27) "Sponsoring organization" means a person who guarantees the uncovered expenses of a health maintenance organization and who is financially capable, as determined by the commissioner, of meeting the obligations resulting from that guarantee.
(28) "Uncovered expenses" means the estimated amount of administrative expenses and the estimated cost of health care services that are not guaranteed, insured, or assumed by a person other than the health maintenance organization. The term does not include the cost of health care services if the physician or provider agrees in writing that an enrollee is not liable, assessable, or in any way subject to making payment for the services except as described in the evidence of coverage issued to the enrollee under Article 20A.09. The term includes any amount due on loans in the next calendar year unless the amount is specifically subordinated to uncovered medical and health care expenses or the amount is guaranteed by a sponsoring organization. (V.T.I.C. Art. 20A.02, Subdivs. (b); (c); (e); (f); (g); (h); (i); (j); (k) as amended Acts 75th Leg., R.S., Ch. 1023; (k) as amended Acts 75th Leg., R.S., Ch. 1026; (l) as amended Acts 75th Leg., R.S., Ch. 1023; (l) as amended Acts 75th Leg., R.S., Ch. 1026; (m); (n); (o); (p); (q); (r); (s); (t); (u); (v); (w) as amended Acts 75th Leg., R.S., Ch. 1023; (x); (y); (z); (aa) as added Acts 76th Leg., R.S., Ch. 273; (aa) as added Acts 76th Leg., R.S., Ch. 1380; Art. 20A.12A, Sec. (a)(1).)
Sec. 843.003. POWERS OF INSURERS AND GROUP HOSPITAL SERVICE CORPORATIONS. (a) An insurer authorized to engage in the business of insurance in this state under Chapter 822, 841, or 883, an accident insurance company, health insurance company, or life insurance company authorized to engage in the business of insurance in this state under Chapter 982, or a group hospital service corporation may, either directly or through a subsidiary or affiliate, organize and operate a health maintenance organization under this chapter.
(b) Any two or more insurers or group hospital service corporations described by Subsection (a), or their subsidiaries or affiliates, may jointly organize and operate a health maintenance organization under this chapter.
(c) An insurer or group hospital service corporation may contract with a health maintenance organization to provide:
(1) insurance or similar protection against the cost of care provided by the health maintenance organization; and
(2) coverage if the health maintenance organization does not meet its obligations.
(d) The authority of an insurer or group hospital service corporation under a contract described by Subsection (c) may include the authority to make benefit payments to a health maintenance organization for health care services provided by physicians or providers under a health care plan. (V.T.I.C. Art. 20A.16.)
Sec. 843.004. GOVERNING BODY OF HEALTH MAINTENANCE ORGANIZATION. The governing body of a health maintenance organization may include physicians, providers, or other individuals, or any combination of physicians, providers, and other individuals. (V.T.I.C. Art. 20A.07.)
Sec. 843.005. USE OF INSURANCE-RELATED TERMS BY HEALTH MAINTENANCE ORGANIZATION. A health maintenance organization that is not authorized as an insurer may not use in its name, contracts, or literature the word "insurance," "casualty," "surety," or "mutual," or any other words that are:
(1) descriptive of the insurance, casualty, or surety business; or
(2) deceptively similar to the name or description of an insurer or surety corporation engaging in business in this state. (V.T.I.C. Art. 20A.14, Sec. (d).)
Sec. 843.006. PUBLIC DOCUMENTS. (a) Except as provided by Subsection (b), each application, filing, and report required under this chapter or Chapter 20A is a public document.
(b) An examination report is confidential but may be released if, in the opinion of the commissioner, the release is in the public interest. (V.T.I.C. Art. 20A.27.)
Sec. 843.007. CONFIDENTIALITY OF MEDICAL AND HEALTH INFORMATION. (a) Any information relating to the diagnosis, treatment, or health of an enrollee or applicant obtained by a health maintenance organization from the enrollee or applicant or from a physician or provider shall be held in confidence and may not be disclosed to any person except:
(1) to the extent necessary to accomplish the purposes of this chapter or Chapter 20A;
(2) with the express consent of the enrollee or applicant;
(3) in compliance with a statute or court order for the production or discovery of evidence; or
(4) in the event of a claim or litigation between the enrollee or applicant and the health maintenance organization in which the information is pertinent.
(b) A health maintenance organization is entitled to claim the statutory privilege against disclosure that the physician or provider who provides the information to the health maintenance organization is entitled to claim. (V.T.I.C. Art. 20A.25.)
Sec. 843.008. COSTS OF ADMINISTERING HEALTH MAINTENANCE ORGANIZATION LAWS. Money collected under this chapter and Article 20A.33 must be sufficient to administer this chapter and Chapter 20A. (V.T.I.C. Art. 20A.03, Sec. (d).)
Sec. 843.009. APPEALS; JUDICIAL REVIEW. (a) A person who is affected by a rule, ruling, or decision of the department or the commissioner is entitled to have the rule, ruling, or decision reviewed by the commissioner by applying to the commissioner.
(b) An application must identify:
(1) the applicant;
(2) the rule, ruling, or decision affecting the applicant;
(3) the interest of the applicant in the rule, ruling, or decision;
(4) the grounds of the applicant's objection;
(5) the action sought of the commissioner; and
(6) the reasons and grounds for the commissioner to take the action.
(c) An applicant shall file the original application with the chief clerk of the department with a certification that a true and correct copy of the application has been filed with the commissioner.
(d) Not later than the 30th day after the date the application is filed, and after 10 days' written notice to each party of record, the commissioner shall review the action in a hearing. In the hearing, any evidence and any matter pertinent to the application may be submitted to the commissioner regardless of whether it was included in the application.
(e) After the hearing, the commissioner shall render a decision at the earliest possible date. The application has precedence over all other business of a different nature pending before the commissioner.
(f) The commissioner shall adopt rules, consistent with this section, relating to applications under this section and consideration of those applications that the commissioner considers advisable.
(g) A person who is affected by a rule, ruling, or decision of the commissioner and is dissatisfied with the rule, ruling, or decision may, after failing to get relief from the commissioner, file a petition seeking judicial review of the rule, ruling, or decision under Subchapter D, Chapter 36. The action has precedence over all other causes on the docket of a different nature. (V.T.I.C. Art. 20A.23, Secs. (a), (b), (c) (part).)
[Sections 843.010-843.050 reserved for expansion]
SUBCHAPTER B. APPLICABILITY OF AND CONSTRUCTION WITH
OTHER LAWS
Sec. 843.051. APPLICABILITY OF INSURANCE AND GROUP HOSPITAL SERVICE CORPORATION LAWS. (a) Except to the extent that the commissioner determines that the nature of health maintenance organizations, health care plans, or evidences of coverage renders a provision of the following laws clearly inappropriate, Articles 21.21, 21.21A, 21.21-2, 21.21-5, and 21.21-6, as added by Chapter 522, Acts of the 74th Legislature, Regular Session, 1995, and the Unauthorized Insurers False Advertising Process Act (Article 21.21-1, Vernon's Texas Insurance Code) apply to:
(1) health maintenance organizations that offer basic, limited, and single health care coverages;
(2) basic, limited, and single health care plans; and
(3) evidences of coverage under basic, limited, and single health care plans.
(b) A health maintenance organization is subject to:
(1) Section 3B, Article 3.51-6;
(2) Chapter 827 and is an authorized insurer for purposes of that chapter; and
(3) Article 21.49-8.
(c) Except as otherwise provided by this chapter or other law, insurance laws and group hospital service corporation laws do not apply to a health maintenance organization that holds a certificate of authority under this chapter. This subsection applies to an insurer or a group hospital service corporation only with respect to the health maintenance organization activities of the insurer or corporation.
(d) Activities permitted under other chapters of this code are not subject to this chapter.
(e) Except for Articles 21.07-6 and 21.58A, insurance laws and group hospital service corporation laws do not apply to a physician or provider. Notwithstanding this subsection, a physician or provider who conducts a utilization review during the ordinary course of treatment of patients under a joint or delegated review agreement with a health maintenance organization on services provided by the physician or provider is not required to obtain certification under Section 3, Article 21.58A. (V.T.I.C. Art. 20A.14, Sec. (b); Art. 20A.26, Secs. (a), (f)(4), (h) (part), (i).)
Sec. 843.052. LAWS RELATING TO SOLICITATION OR ADVERTISING. (a) Solicitation of enrollees by a health maintenance organization or its representative or agent does not violate a law relating to solicitation or advertising by a physician or provider.
(b) The provision of factually accurate information by a health maintenance organization or its personnel to prospective enrollees regarding coverage, rates, location and hours of service, and names of affiliated institutions, physicians, and providers does not violate any law relating to solicitation or advertising by a physician or provider. The provision of that information with respect to a physician or provider may not be contrary to or in conflict with any law or ethical provision regulating the practice of a practitioner of any professional service provided through or in connection with the physician or provider. (V.T.I.C. Art. 20A.26, Secs. (b), (d).)
Sec. 843.053. LAWS RELATING TO RESTRAINT OF TRADE. (a) A health maintenance organization that contracts with a health facility or enters into an independent contractual arrangement with physicians or providers practicing individually or as a group is not, because of the contract or arrangement, considered to have entered into a conspiracy in restraint of trade in violation of Sections 15.01-15.26, Business & Commerce Code.
(b) Notwithstanding any other law, a physician who contracts with one or more physicians in the process of conducting activities that are permitted by law but that do not require a certificate of authority under this chapter is not, because of the contract, considered to have entered into a conspiracy in restraint of trade in violation of Sections 15.01-15.26, Business & Commerce Code. (V.T.I.C. Art. 20A.26, Secs. (e), (f)(3).)
Sec. 843.054. LAWS REQUIRING CERTIFICATE OF NEED FOR HEALTH CARE FACILITY OR SERVICE. (a) A health maintenance organization is not exempt from any statute that provides for the regulation and certification of need of health care facility construction, expansion, or other modification, or the institution of a health care service through the issuance of a certificate of need, if at the time of establishment of operation or during the course of operation of the health maintenance organization it becomes subject to the provisions of that statute.
(b) If the proposed plan of operation of a health maintenance organization includes providing a health care facility or service that makes the health maintenance organization subject to a statute described by Subsection (a), the commissioner may not issue a certificate of authority until the commissioner has received a certified copy of the certificate of need granted to the health maintenance organization by the appropriate agency. (V.T.I.C. Art. 20A.26, Sec. (g).)
Sec. 843.055. LAWS RELATING TO PRACTICE OF MEDICINE. (a) This chapter does not authorize the practice of medicine as defined by state law.
(b) This chapter does not repeal, modify, or amend Section 164.051, 164.052, 164.053, 164.054, or 164.056, Occupations Code, and a health maintenance organization is not exempt from those sections. (V.T.I.C. Art. 20A.26, Sec. (c).)
Sec. 843.056. INAPPLICABILITY OF BANKRUPTCY LAW. By applying for and receiving a certificate of authority to engage in business in this state, a health maintenance organization agrees and admits that it is not subject to and is not eligible to proceed under the United States Bankruptcy Code. (V.T.I.C. Art. 20A.05, Sec. (e).)
[Sections 843.057-843.070 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 843.071. CERTIFICATE OF AUTHORITY REQUIRED; USE OF "HEALTH MAINTENANCE ORGANIZATION" OR "HMO". (a) A person may not organize or operate a health maintenance organization in this state, or sell or offer to sell or solicit offers to purchase or receive advance or periodic consideration in conjunction with a health maintenance organization, without obtaining a certificate of authority under this chapter.
(b) A person may not use "health maintenance organization" or "HMO" in the course of operation unless the person:
(1) complies with this chapter and Chapter 20A; and
(2) holds a certificate of authority under this chapter. (V.T.I.C. Art. 20A.03, Sec. (a) (part); Art. 20A.14, Sec. (f).)
Sec. 843.072. AUTHORIZATION REQUIRED TO ACT AS HEALTH MAINTENANCE ORGANIZATION. (a) A person, including a physician or provider, may not perform any act of a health maintenance organization except in accordance with the specific authorization of this chapter or other law.
(b) A person, including a physician or provider, who performs an act of a health maintenance organization that requires a certificate of authority under this chapter without first obtaining the certificate is subject to all enforcement processes and procedures available against an unauthorized insurer under Chapter 101 and Subchapter C, Chapter 36.
(c) This section does not apply to an activity exempt from regulation under Section 843.051(e), 843.053, 843.073, or 843.318. (V.T.I.C. Art. 20A.03, Secs. (e), (f), (g).)
Sec. 843.073. CERTIFICATE OF AUTHORITY REQUIREMENT: APPLICABILITY TO PHYSICIANS AND PROVIDERS. (a) A person is not required to obtain a certificate of authority under this chapter to the extent that the person is:
(1) a physician engaged in the delivery of medical care; or
(2) a provider engaged in the delivery of health care services other than medical care as part of a health maintenance organization delivery network.
(b) Except as provided by Section 843.101 or 843.318(a), a physician or provider that employs or enters into a contractual arrangement with a provider or group of providers to provide basic or limited health care services or a single health care service is subject to this chapter and Chapter 20A and is required to obtain a certificate of authority under this chapter. (V.T.I.C. Art. 20A.26, Secs. (f)(1), (2).)
Sec. 843.074. CERTIFICATE OF AUTHORITY REQUIREMENT: APPLICABILITY TO MEDICAL SCHOOL AND MEDICAL AND DENTAL UNIT. A medical school or medical and dental unit, as defined or described by Section 61.003, 61.501, or 74.601, Education Code, is not required to obtain a certificate of authority under this chapter to the extent that the medical school or medical and dental unit contracts to deliver medical care within a health maintenance organization delivery network. This chapter is otherwise applicable to the medical school or medical and dental unit. (V.T.I.C. Art. 20A.26, Sec. (j).)
Sec. 843.075. CERTIFICATE OF AUTHORITY FOR SINGLE HEALTH CARE SERVICE PLAN. The commissioner may issue a certificate of authority to a health maintenance organization organized and operated solely to provide a single health care service plan. (V.T.I.C. Art. 20A.03, Sec. (c) (part).)
Sec. 843.076. APPLICATION. (a) Any person may apply to the commissioner for and obtain a certificate of authority to organize and operate a health maintenance organization.
(b) An application for a certificate of authority must:
(1) be on a form prescribed by commissioner rule; and
(2) be verified by the applicant or an officer or other authorized representative of the applicant. (V.T.I.C. Art. 20A.03, Sec. (a) (part); Art. 20A.04, Sec. (a) (part).)
Sec. 843.077. ELIGIBILITY OF FOREIGN CORPORATION. A foreign corporation may qualify for a certificate of authority under this chapter, including a certificate of authority for a single health care service plan, subject to the corporation's:
(1) registration to engage in business in this state as a foreign corporation under the Texas Business Corporation Act; and
(2) compliance with this chapter and other applicable state laws. (V.T.I.C. Art. 20A.03, Secs. (a) (part), (c) (part).)
Sec. 843.078. CONTENTS OF APPLICATION. (a) An application for a certificate of authority must include:
(1) a copy of the applicant's basic organizational document, if any, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents;
(2) all amendments to the applicant's basic organizational document; and
(3) a copy of the bylaws, rules and regulations, or similar documents, if any, regulating the conduct of the applicant's internal affairs.
(b) An application for a certificate of authority must include a list of the names, addresses, and official positions of the persons responsible for the conduct of the applicant's affairs, including:
(1) each member of the board of directors, board of trustees, executive committee, or other governing body or committee;
(2) the principal officer, if the applicant is a corporation; and
(3) each partner or member, if the applicant is a partnership or association.
(c) An application for a certificate of authority must include a copy of any independent contract or other contract made or to be made between the applicant and any physician, provider, or person listed under Subsection (b).
(d) An application for a certificate of authority must include:
(1) a copy of the form of evidence of coverage to be issued to an enrollee;
(2) a copy of the form of the group contract, if any, to be issued to an employer, union, trustee, or other organization; and
(3) a written description of health care plan terms made available to any current or prospective group contract holder or current or prospective enrollee of the health maintenance organization in accordance with Section 843.201.
(e) An application for a certificate of authority must include a financial statement that is current on the date of the application and that includes:
(1) the sources and application of funds;
(2) projected financial statements during the initial period of operations;
(3) a balance sheet reflecting the condition of the applicant on the date operations are expected to start;
(4) a statement of revenue and expenses with expected member months; and
(5) a cash flow statement that states any capital expenditures, purchase and sale of investments, and deposits with the state.
(f) An application for a certificate of authority must include the schedule of charges to be used during the first 12 months of operation.
(g) An application for a certificate of authority must include a statement acknowledging that lawful process in a legal action or proceeding against the health maintenance organization on a cause of action arising in this state is valid if served in accordance with Chapter 804.
(h) An application for a certificate of authority must include a statement reasonably describing the service area or areas to be served by the applicant.
(i) An application for a certificate of authority must include a description of the complaint procedures the applicant will use.
(j) An application for a certificate of authority must include a description of the procedures and programs to be implemented by the applicant to meet the quality of health care requirements of this chapter and Chapter 20A.
(k) An application for a certificate of authority must include network configuration information, including an explanation of the adequacy of the physician and other provider network configuration. The information provided must:
(1) include the names of physicians, specialty physicians, and other providers by zip code or zip code map; and
(2) indicate whether each physician or other provider is accepting new patients from the health maintenance organization.
(l) An application for a certificate of authority must include a written description of the types of compensation arrangements, such as compensation based on fee-for-service arrangements, risk-sharing arrangements, or capitated risk arrangements, made or to be made with physicians and providers in exchange for the provision of or an arrangement to provide health care services to enrollees, including any financial incentives for physicians and providers. The compensation arrangements are confidential and are not subject to the public information law, Chapter 552, Government Code.
(m) An application for a certificate of authority must include documentation demonstrating that the applicant will comply with Article 20A.09Z.
(n) An application for a certificate of authority must include any other information that the commissioner requires to make the determinations required by this chapter and Chapter 20A. (V.T.I.C. Art. 20A.04, Sec. (a) (part).)
Sec. 843.079. CONTENTS OF APPLICATION: LIMITED HEALTH CARE SERVICE PLAN. In addition to the items required under Section 843.078, an application for a certificate of authority for a limited health care service plan must include a specific description of the health care services to be provided by the applicant. (V.T.I.C. Art. 20A.04, Sec. (a) (part).)
Sec. 843.080. MODIFICATION OR AMENDMENT OF APPLICATION INFORMATION. (a) The commissioner may adopt reasonable rules that the commissioner considers necessary for the proper administration of this chapter to require a health maintenance organization, after receiving its certificate of authority, to submit modifications or amendments to the operations or documents described in Sections 843.078 and 843.079 to the commissioner, for the commissioner's approval or only to provide information, before implementing the modification or amendment or to require the health maintenance organization to indicate the modifications to the commissioner at the time of the next site visit or examination.
(b) As soon as reasonably possible after any filing for approval required under this section is made, the commissioner shall approve or disapprove the filing in writing. If the commissioner does not disapprove a modification or amendment for which the commissioner's approval is required before the 31st day after the date it is filed, the modification or amendment is considered approved. The commissioner may delay action as necessary for proper consideration for not more than an additional 30 days. (V.T.I.C. Art. 20A.04, Sec. (b).)
Sec. 843.081. DEADLINE FOR ACTION ON APPLICATION. (a) After receipt by the department of a completed application for a certificate of authority, the department shall provide notice and an opportunity for a hearing regarding the matter. Not later than the 75th day after the date the department receives the completed application:
(1) the department shall schedule the matter for a hearing; or
(2) the commissioner shall issue or deny a certificate of authority to the person filing the application.
(b) Notwithstanding Subsection (a), the commissioner may grant to an applicant a delay of final action on the application. (V.T.I.C. Art. 20A.05, Sec. (a) (part).)
Sec. 843.082. APPROVAL OF APPLICATION. The commissioner shall issue a certificate of authority on payment of the application fee prescribed by Section 843.154(c) if the commissioner is satisfied that:
(1) with respect to health care services to be provided, the applicant:
(A) has demonstrated the willingness and potential ability to ensure that the health care services will be provided in a manner to:
(i) ensure both availability and accessibility of adequate personnel and facilities; and
(ii) enhance availability, accessibility, quality of care, and continuity of services;
(B) has arrangements, established in accordance with rules adopted by the commissioner, for a continuing quality of health care assurance program concerning health care processes and outcomes; and
(C) has a procedure, that is in accordance with rules adopted by the commissioner, to develop, compile, evaluate, and report statistics relating to the cost of operation, the pattern of utilization of services, and availability and accessibility of services;
(2) the person responsible for the conduct of the affairs of the applicant is competent, is trustworthy, and has a good reputation;
(3) the health care plan, limited health care service plan, or single health care service plan is an appropriate mechanism through which the health maintenance organization will effectively provide or arrange for the provision of basic health care services, limited health care services, or a single health care service on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for copayments;
(4) the health maintenance organization is fully responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees, after considering:
(A) the financial soundness of the health care plan's arrangement for health care services and the schedule of charges used in connection with the arrangement;
(B) the adequacy of working capital;
(C) any agreement with an insurer, a group hospital service corporation, a political subdivision of government, or any other organization for insuring the payment of the cost of health care services or providing for automatic applicability of an alternative coverage in the event the plan is discontinued;
(D) any agreement that provides for the provision of health care services; and
(E) any deposit of cash or securities submitted in accordance with Section 843.405 as a guarantee that the obligations will be performed; and
(5) the proposed plan of operation, as shown by the information submitted under Section 843.078 and, if applicable, Section 843.079, or by independent investigation, does not violate state law. (V.T.I.C. Art. 20A.05, Sec. (a) (part).)
Sec. 843.083. DENIAL OF CERTIFICATE OF AUTHORITY. (a) If the commissioner certifies that the health maintenance organization's proposed plan of operation does not meet the requirements of Section 843.082, the commissioner may not issue a certificate of authority.
(b) The commissioner shall notify the applicant that the plan is deficient and specify the deficiencies. (V.T.I.C. Art. 20A.05, Sec. (b).)
Sec. 843.084. DURATION OF CERTIFICATE OF AUTHORITY. A certificate of authority continues in effect:
(1) while the certificate holder meets the requirements of this chapter and Chapter 20A; or
(2) until the commissioner suspends or revokes the certificate or the commissioner terminates the certificate at the request of the certificate holder. (V.T.I.C. Art. 20A.05, Sec. (c) (part).)
Sec. 843.085. CHANGE IN CONTROL: COMMISSIONER APPROVAL. Any change in control, as defined by Chapter 823, of a health maintenance organization is subject to the approval of the commissioner. (V.T.I.C. Art. 20A.05, Sec. (c) (part).)
[Sections 843.086-843.100 reserved for expansion]
SUBCHAPTER D. GENERAL POWERS AND DUTIES OF
HEALTH MAINTENANCE ORGANIZATIONS
Sec. 843.101. PROVIDING OR ARRANGING FOR CARE. (a) A health maintenance organization may provide or arrange for medical care services only through:
(1) other health maintenance organizations; or
(2) physicians or groups of physicians who have independent contracts with the health maintenance organizations.
(b) A health maintenance organization may provide or arrange for other health care services only through:
(1) other health maintenance organizations;
(2) providers or groups of providers who are under contract with or are employed by the health maintenance organization; or
(3) additional health maintenance organizations or physicians or providers who have contracted for health care services with:
(A) the other health maintenance organizations;
(B) physicians with whom the health maintenance organization has contracted; or
(C) providers who are under contract with or are employed by the health maintenance organization.
(c) Notwithstanding Subsections (a) and (b), a health maintenance organization may provide or authorize the following in a manner approved by the commissioner:
(1) emergency care;
(2) services by referral; and
(3) services provided outside the service area.
(d) A health maintenance organization may not employ or contract with other health maintenance organizations or physicians or providers in a manner that is prohibited by a law of this state under which those health maintenance organizations or physicians or providers are licensed or otherwise authorized. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.102. HEALTH MAINTENANCE ORGANIZATION QUALITY ASSURANCE. (a) A health maintenance organization shall establish procedures to ensure that health care services are provided to enrollees under reasonable standards of quality of care that are consistent with prevailing professionally recognized standards of medical practice. The procedures must include mechanisms to ensure availability, accessibility, quality, and continuity of care.
(b) A health maintenance organization shall operate a continuing internal quality assurance program to monitor and evaluate its health care services, including primary and specialist physician services and ancillary and preventive health care services, in all institutional and noninstitutional settings.
(c) The commissioner by rule may establish minimum standards and requirements for the quality assurance programs, including standards for ensuring availability, accessibility, quality, and continuity of care.
(d) A health maintenance organization shall:
(1) record formal proceedings of quality assurance program activities;
(2) maintain documentation in a confidential manner; and
(3) make the quality assurance program minutes available to the commissioner.
(e) A health maintenance organization shall establish and maintain a physician review panel to assist in:
(1) reviewing medical guidelines or criteria; and
(2) determining prescription drugs to be covered by the health maintenance organization, if the health maintenance organization offers a prescription drug benefit.
(f) A health maintenance organization shall ensure the use and maintenance of an adequate patient record system to facilitate documentation and retrieval of clinical information for the health maintenance organization's evaluation of continuity and coordination of patient care and assessment of the quality of health and medical care provided to enrollees.
(g) The clinical records of enrollees shall be available to the commissioner for examination and review to determine compliance. The records are confidential and privileged and are not subject to the public information law, Chapter 552, Government Code, or to subpoena, except to the extent necessary to enable the commissioner to enforce this section.
(h) A health maintenance organization shall establish a mechanism for the periodic reporting of quality assurance program activities to its governing body, providers, and appropriate health maintenance organization staff. (V.T.I.C. Art. 20A.37.)
Sec. 843.103. ACQUISITION AND OPERATION OF FACILITIES; CERTAIN LOANS; COMMISSIONER APPROVAL OF AFFILIATE TRANSACTIONS. (a) A health maintenance organization may:
(1) purchase, lease, construct, renovate, operate, or maintain hospitals or medical facilities and ancillary equipment and other property reasonably required for the principal office of the health maintenance organization or for another purpose necessary in engaging in the business of the health maintenance organization; and
(2) make loans to a medical group, under an independent contract with the group to further its program, or corporations under its control, to acquire or construct medical facilities and hospitals, or to further a program providing health care services to enrollees.
(b) If the exercise of a power granted under Subsection (a) involves an affiliate, as described by Section 823.003, the health maintenance organization before exercising that power shall file notice and adequate supporting information with the commissioner for approval.
(c) The commissioner shall disapprove the exercise of a power described by Subsection (a) that would in the commissioner's opinion:
(1) substantially and adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations; or
(2) impair the interests of the public or the health maintenance organization's enrollees or creditors in this state.
(d) If the commissioner does not disapprove the exercise of a power described by Subsection (a) before the 31st day after the date notice is filed under this section, the exercise of the power is considered approved. The commissioner may, by official order, delay action as necessary for proper consideration for not more than an additional 30 days.
(e) The commissioner may adopt rules exempting from the filing requirements of Subsection (b) an activity that has a de minimis effect. (V.T.I.C. Art. 20A.06, Secs. (a) (part), (b).)
Sec. 843.104. CONTRACTS FOR CERTAIN ADMINISTRATIVE FUNCTIONS. A health maintenance organization may contract with any person to perform functions such as marketing, enrollment, and administration on behalf of the health maintenance organization. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.105. MANAGEMENT AND EXCLUSIVE AGENCY CONTRACTS. (a) A health maintenance organization may not enter into a management contract or exclusive agency contract unless the proposed contract is first filed with and approved by the commissioner.
(b) The commissioner must approve or disapprove the contract not later than the 30th day after the date the contract is filed or within a reasonable extended period that the commissioner specifies by notice given within the 30-day period.
(c) The commissioner shall disapprove the proposed contract if the commissioner determines that the contract:
(1) subjects the health maintenance organization to excessive charges;
(2) extends for an unreasonable time;
(3) does not contain fair and adequate standards of performance;
(4) authorizes persons to manage the health maintenance organization who are not sufficiently trustworthy, competent, experienced, and free from conflict of interest to manage the health maintenance organization with due regard for the interests of the health maintenance organization's enrollees or creditors or the public; or
(5) contains provisions that impair the interests of the public in this state or the health maintenance organization's enrollees or creditors.
(d) The commissioner shall disapprove a proposed management contract unless the commissioner determines that the management contractor has in force in its own name a fidelity bond on its officers and employees in the amount of at least $100,000 or another amount prescribed by the commissioner.
(e) The fidelity bond must be issued by an insurer that holds a certificate of authority in this state. If, after notice and hearing, the commissioner determines that a fidelity bond is not available from an insurer that holds a certificate of authority in this state, the management contractor may obtain a fidelity bond procured by a surplus lines agent resident in this state in compliance with Chapter 981.
(f) The fidelity bond must obligate the surety to pay any loss of money or other property that the health maintenance organization sustains because of an act of fraud or dishonesty by an employee or officer of the management contractor during the period that the management contract is in effect.
(g) Instead of a fidelity bond, the management contractor may deposit with the comptroller cash or securities acceptable to the commissioner. The deposit must be maintained in the amount and is subject to the same conditions required for a fidelity bond under this section. (V.T.I.C. Art. 20A.18.)
Sec. 843.106. INSURANCE, REINSURANCE, INDEMNITY, AND REIMBURSEMENT. A health maintenance organization may contract with an insurer or group hospital service corporation authorized to engage in business in this state to provide insurance, reinsurance, indemnification, or reimbursement against the cost of health care and medical care services provided by the health maintenance organization. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.107. INDEMNITY BENEFITS; POINT-OF-SERVICE PROVISIONS. A health maintenance organization may offer:
(1) indemnity benefits covering out-of-area emergency care;
(2) indemnity benefits, in addition to those relating to out-of-area and emergency care, provided through an insurer or group hospital service corporation;
(3) a point-of-service plan under Article 3.64; or
(4) a point-of-service rider under Section 843.108. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.108. POINT-OF-SERVICE RIDER. (a) In this section, "point-of-service rider" means a rider under which indemnity benefits for the cost of health care services are provided by a health maintenance organization in conjunction with corresponding benefits arranged for or provided by a health maintenance organization.
(b) A health maintenance organization may offer a point-of-service rider for out-of-network coverage without obtaining a separate certificate of authority as an insurer if the expenses incurred under the point-of-service rider do not exceed 10 percent of the total medical and hospital expenses incurred for all health plan products sold by the health maintenance organization. If the expenses exceed that level, the health maintenance organization may not issue new point-of-service riders until the expenses fall below that level or until the health maintenance organization obtains a certificate of authority as an insurer.
(c) Indemnity benefits for services provided under a point-of-service rider may be limited to those services defined in the evidence of coverage and may be subject to different cost-sharing provisions. The cost-sharing provisions for indemnity benefits may be higher than the cost-sharing provisions for in-network health maintenance organization coverage. For enrollees in a limited provider network, higher cost-sharing may be imposed only when benefits or services are obtained outside the health maintenance organization delivery network.
(d) A health maintenance organization that issues a point-of-service rider under this section must meet additional net worth requirements prescribed by the commissioner. The commissioner shall base the net worth requirements on the actuarial relation of the amount of insurance risk assumed through the point-of-service rider to the amount of solvency and reserve requirements otherwise required of the health maintenance organization. (V.T.I.C. Art. 20A.02, Subdiv. (bb) (part); Art. 20A.06, Sec. (c).)
Sec. 843.109. PAYMENT BY GOVERNMENTAL OR PRIVATE ENTITY. A health maintenance organization may accept from a governmental or private entity payments for all or part of the cost of services provided or arranged for by the health maintenance organization. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.110. CORPORATION, PARTNERSHIP, OR ASSOCIATION POWERS. A health maintenance organization has all powers of a partnership, association, or corporation, including a professional association or corporation, as appropriate under the organizational documents of the health maintenance organization, that are not in conflict with this chapter or other applicable law. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
Sec. 843.111. GROUP MODEL HEALTH MAINTENANCE ORGANIZATIONS. (a) In this section, "group model health maintenance organization" means a health maintenance organization that provides the majority of its professional services through a single group medical practice that is formally affiliated with the medical school component of a state-supported public college or university in this state.
(b) Unless this section and a power specified in Section 843.101, 843.103, 843.104, 843.106, 843.107, 843.109, or 843.110 are specifically amended by law, a law, without regard to the time of enactment, may not be construed to prohibit or restrict a group model health maintenance organization from:
(1) selectively contracting with or declining to contract with a provider as the group model health maintenance organization considers necessary;
(2) contracting for or declining to contract for an individual health care service or full range of health care services as the group model health maintenance organization considers necessary, if the service or services may be legally provided by the contracting provider; or
(3) requiring enrolled members of the group model health maintenance organization who wish to obtain the services covered by the group model health maintenance organization to use the providers specified by the group model health maintenance organization. (V.T.I.C. Art. 20A.06A.)
Sec. 843.112. DENTAL POINT-OF-SERVICE OPTION. (a) In this section:
(1) "Point-of-service option" means a plan provided through a contractual arrangement under which:
(A) indemnity benefits for the cost of dental care services, other than emergency care or emergency dental care, are provided by an insurer or group hospital service corporation in conjunction with corresponding benefits arranged or provided by a health maintenance organization; and
(B) an enrollee may choose to obtain benefits or services under the indemnity plan or the health maintenance organization plan in accordance with specific provisions of a point-of-service contract.
(2) "Provider panel" means the providers with whom a health maintenance organization contracts to provide dental services to enrollees covered under a dental benefit plan.
(b) This section applies to a dental health maintenance organization or another single service health maintenance organization that provides dental benefits. This section does not apply to a health maintenance organization that has 10,000 or fewer enrollees in this state who are enrolled in dental benefit plans based on a provider panel.
(c) If an employer, association, or other private group arrangement that employs 25 or more employees or has 25 or more members offers and contributes to the cost of dental benefit plan coverage to employees or individuals only through a provider panel, the health maintenance organization with which the employer, association, or other private group arrangement is contracting for the coverage shall offer, or contract with another entity to offer, a dental point-of-service option to the employer, association, or other private group arrangement. The employer may offer the dental point-of-service option to the employee or individual to accept or reject.
(d) If a health maintenance organization's dental provider panel is the sole delivery system offered to employees by an employer, the health maintenance organization:
(1) shall offer the employer a dental point-of-service option;
(2) may not impose a minimum participation level on the dental point-of-service option; and
(3) as part of the group enrollment application, shall provide to each employer disclosure statements as required by rules adopted under this code for each dental plan offered.
(e) An employer may require an employee or individual who accepts the point-of-service option to be responsible for the payment of a premium, over the amount of the premium for the coverage provided to employees or members under the dental benefit plan offered through a provider panel, directly or by payroll deduction in the same manner in which the other premium is paid. The premium for the point-of-service option must be based on the actuarial value of that coverage.
(f) Different cost-sharing provisions may be imposed for the point-of-service option.
(g) An employer may charge an employee or individual who accepts the point-of-service option a reasonable administrative fee for costs associated with the employer's reasonable administration of the point-of-service option. (V.T.I.C. Art. 20A.38.)
Sec. 843.113. SPECIFIED POWERS NOT EXCLUSIVE. The powers of a health maintenance organization are not limited to the powers specified by this subchapter. (V.T.I.C. Art. 20A.06, Sec. (a) (part).)
[Sections 843.114-843.150 reserved for expansion]
SUBCHAPTER E. REGULATION OF HEALTH MAINTENANCE ORGANIZATIONS
Sec. 843.151. RULES. The commissioner may adopt reasonable rules as necessary and proper to:
(1) implement this chapter and Chapter 20A, including rules to:
(A) prescribe authorized investments for a health maintenance organization for all investments not otherwise addressed in this chapter;
(B) ensure that enrollees have adequate access to health care services; and
(C) establish minimum physician-to-patient ratios, mileage requirements for primary and specialty care, maximum travel time, and maximum waiting time for obtaining an appointment; and
(2) meet the requirements of federal law and regulations. (V.T.I.C. Art. 20A.22, Secs. (a), (b) (part), (c).)
Sec. 843.152. SUBPOENA AUTHORITY. In implementing this chapter and Chapter 20A, the commissioner may exercise subpoena authority in accordance with Subchapter C, Chapter 36. (V.T.I.C. Art. 20A.03, Sec. (h).)
Sec. 843.153. AUTHORITY TO CONTRACT. In performing duties under this chapter and Chapter 20A, the commissioner may contract with a state agency or, after notice and opportunity for hearing, with a qualified person to make recommendations concerning determinations to be made by the commissioner. (V.T.I.C. Art. 20A.28.)
Sec. 843.154. FEES. (a) The commissioner shall, within the limits prescribed by this section, prescribe the fees to be charged under this section.
(b) Fees collected under this section shall be deposited to the credit of the Texas Department of Insurance operating account.
(c) A health maintenance organization shall pay to the commissioner a fee in an amount not to exceed:
(1) $18,000 for filing and review of its original application for a certificate of authority;
(2) $200 for filing of an evidence of coverage that requires approval; and
(3) $100 for a filing that is required by rule but does not require approval.
(d) A health maintenance organization shall pay to the comptroller a fee in an amount not to exceed $500 for filing of an annual report under Section 843.155.
(e) A health maintenance organization shall pay to the commissioner a fee, in an amount certified by the commissioner to be just and reasonable, for the expenses of all examinations of health maintenance organizations made on behalf of the state by the commissioner or under the commissioner's authority.
(f) A health maintenance organization shall pay to the commissioner a fee in an amount assessed by the commissioner and paid in accordance with rules adopted by the commissioner for the expenses of an examination under Section 843.156(a) that:
(1) are incurred by the commissioner or under the commissioner's authority; and
(2) are directly attributable to that examination, including the actual salaries and expenses of the examiners directly attributable to that examination, as determined under rules adopted by the commissioner. (V.T.I.C. Art. 20A.32, Sec. (a) (part).)
Sec. 843.155. ANNUAL REPORT. (a) Not later than March 1 of each year, a health maintenance organization shall file with the commissioner a report covering the preceding calendar year.
(b) The report shall:
(1) be verified by at least two principal officers;
(2) be in a form prescribed by the commissioner; and
(3) include:
(A) a financial statement of the health maintenance organization, including its balance sheet and receipts and disbursements for the preceding calendar year, certified by an independent public accountant;
(B) the number of individuals enrolled during the preceding calendar year, the number of enrollees as of the end of that year, and the number of enrollments terminated during that year;
(C) updated financial projections for the next calendar year of the type described in Section 843.078(e), until the health maintenance organization has had a net income for 12 consecutive months; and
(D) other information relating to the performance of the health maintenance organization as necessary to enable the commissioner to perform the commissioner's duties under this chapter and Chapter 20A.
(c) Chapter 802 and Article 1.11 apply to the annual report of a health maintenance organization. (V.T.I.C. Art. 20A.10.)
Sec. 843.156. EXAMINATIONS. (a) The commissioner may examine the quality of health care services and the affairs of any health maintenance organization or applicant for a certificate of authority under this chapter. The commissioner may conduct an examination as often as the commissioner considers necessary, but shall conduct an examination at least once every three years.
(b) A health maintenance organization shall make its books and records relating to its operations available for an examination and shall facilitate an examination in every way.
(c) Each physician and provider with whom the health maintenance organization has a contract, agreement, or other arrangement is required to make available for an examination only that portion of the physician's or provider's books and records that is relevant to the physician's or provider's relationship with the health maintenance organization.
(d) On request of the commissioner, a health maintenance organization shall provide to the commissioner a copy of any contract, agreement, or other arrangement between the health maintenance organization and a physician or provider. Documentation provided to the commissioner under this subsection is confidential and is not subject to the public information law, Chapter 552, Government Code.
(e) Medical, hospital, and health records of enrollees and records of physicians and providers providing service under an independent contract with a health maintenance organization are subject to an examination only as necessary for a continuing quality of health assurance program concerning health care procedures and outcomes that is established in accordance with an approved plan under this chapter. The plan shall provide for adequate protection of the confidentiality of medical information. Medical information may be disclosed only in accordance with this chapter and other applicable law and is subject to subpoena only on a showing of good cause.
(f) The commissioner may examine and use the records of a health maintenance organization, including records of a quality of care assurance program and records of a medical peer review committee, as necessary to implement the purposes of this chapter and Chapter 20A, including commencement of an enforcement action under Section 843.461 or 843.462 or otherwise implement this chapter or Chapter 20A. Information obtained under this subsection is confidential and privileged and is not subject to the public information law, Chapter 552, Government Code, or to subpoena except as necessary for the commissioner to enforce this chapter or Chapter 20A. In this subsection, "medical peer review committee" has the meaning assigned by Section 151.002, Occupations Code.
(g) For the purpose of an examination, the commissioner may administer oaths to and examine the officers and agents of a health maintenance organization and the principals of physicians and providers described by this section concerning their business.
(h) Articles 1.04A, 1.15, 1.16, and 1.19 apply to a health maintenance organization, except to the extent that the commissioner determines that the nature of the examination of a health maintenance organization renders the applicability of those provisions clearly inappropriate.
(i) Section 38.001, Section 81.003, Chapter 82, and Article 1.12 apply to a health maintenance organization. (V.T.I.C. Art. 20A.17.)
Sec. 843.157. REHABILITATION, LIQUIDATION, SUPERVISION, OR CONSERVATION OF HEALTH MAINTENANCE ORGANIZATION. (a) The rehabilitation, liquidation, supervision, or conservation of a health maintenance organization shall be treated as the rehabilitation, liquidation, supervision, or conservation of an insurer and be conducted under the supervision of the commissioner under Article 21.28 or 21.28-A, as appropriate.
(b) The commissioner may also order the rehabilitation, liquidation, supervision, or conservation of a health maintenance organization if in the commissioner's opinion the continued operation of the health maintenance organization would be hazardous to the enrollees or to the people of this state. (V.T.I.C. Art. 20A.21.)
[Sections 843.158-843.200 reserved for expansion]
SUBCHAPTER F. RELATIONS WITH ENROLLEES AND GROUP
CONTRACT HOLDERS
Sec. 843.201. DISCLOSURE OF INFORMATION ABOUT HEALTH CARE PLAN TERMS. (a) A health maintenance organization shall provide an accurate written description of health care plan terms, including restrictions or limitations related to a limited provider network or delegated network within a health care plan, to allow a current or prospective group contract holder or current or prospective enrollee to make comparisons and informed decisions before selecting among health care plans. The written description must:
(1) be in a readable and understandable format prescribed by the commissioner; and
(2) include a current list of physicians and providers, including a delineation of any limited provider network or delegated network.
(b) A health maintenance organization may satisfy the requirement imposed under Subsection (a) through a handbook provided by the health maintenance organization if:
(1) the handbook's contents are substantially similar to and provide the same level of disclosure as the written description prescribed by the commissioner; and
(2) the current list of physicians and providers is also provided. (V.T.I.C. Art. 20A.11, Sec. (b).)
Sec. 843.202. DISCLOSURE OF INFORMATION TO MEDICARE RECIPIENTS. (a) Before a prospective enrollee is enrolled in a health care plan offered to Medicare recipients by a Medicare-contracting health maintenance organization, the health maintenance organization must provide the prospective enrollee with a disclosure form adopted by the commissioner under Subsection (b).
(b) The commissioner shall adopt a disclosure form informing a prospective enrollee in a Medicare-contracting health maintenance organization of:
(1) the effect of enrollment in the health maintenance organization on the prospective enrollee's opportunity to purchase Medicare supplement insurance; and
(2) any differences in the benefits and costs between the health care plan offered to Medicare recipients and Medicare supplement insurance. (V.T.I.C. Art. 20A.11B.)
Sec. 843.203. SELECTION OF PRIMARY CARE PHYSICIAN OR PROVIDER. (a) Each plan application form shall prominently include a space in which the enrollee at the time of application or enrollment shall select a primary care physician or primary care provider.
(b) An enrollee shall at all times have the right to select or change a primary care physician or primary care provider within the health maintenance organization network of available primary care physicians and primary care providers, except that a health maintenance organization may limit an enrollee's request to change physicians or providers to not more than four changes in a 12-month period. (V.T.I.C. Art. 20A.11, Sec. (a).)
Sec. 843.204. UNTRUE OR MISLEADING INFORMATION. (a) A health maintenance organization or a representative of a health maintenance organization may not:
(1) use or distribute or knowingly permit the use or distribution of prospective enrollee information that is untrue or misleading; or
(2) use or knowingly permit the use of:
(A) advertising that is untrue or misleading;
(B) solicitation that is untrue or misleading; or
(C) any form of evidence of coverage that is deceptive.
(b) In this chapter and Chapter 20A, a statement or item of information is:
(1) considered to be untrue if the statement or item does not conform to fact in any respect that is or may be significant to an enrollee of, or person considering enrollment in, a health care plan; and
(2) considered to be misleading, whether or not the statement or item is literally untrue, if, in the total context in which the statement is made or the item is communicated, the statement or item may be reasonably understood by a reasonable person who does not possess special knowledge regarding health care coverage as indicating:
(A) the inclusion of a benefit or advantage that does not exist and that is of possible significance to an enrollee of, or person considering enrollment in, a health care plan; or
(B) the absence of an exclusion, limitation, or disadvantage that does exist and that is of possible significance to an enrollee of, or person considering enrollment in, a health care plan.
(c) In this chapter and Chapter 20A, an evidence of coverage is considered to be deceptive if the evidence of coverage, taken as a whole and with consideration given to typography and format as well as language, would cause a reasonable person who does not possess special knowledge regarding health care plans and evidences of coverage for health care plans to expect charges or benefits, services, or other advantages that the evidence of coverage does not provide or that the health care plan issuing the evidence of coverage does not regularly make available for enrollees covered under the evidence of coverage. (V.T.I.C. Art. 20A.11, Sec. (d); Art. 20A.14, Sec. (a).)
Sec. 843.205. MEMBER'S HANDBOOK; INFORMATION ABOUT COMPLAINTS AND APPEALS. (a) In this section, "major population" means a group constituting 10 percent or more of the enrolled population of the health maintenance organization.
(b) A health maintenance organization shall establish procedures to:
(1) provide to an enrollee a member handbook and materials relating to the complaint and appeals process in the languages of the major populations of the enrolled population; and
(2) provide access to a member handbook and the complaint and appeals process to an enrollee who has a disability that affects the enrollee's ability to communicate or read. (V.T.I.C. Art. 20A.11A.)
Sec. 843.206. NOTICE OF CHANGE IN PAYMENT ARRANGEMENTS. A health maintenance organization shall notify a group contract holder within 30 days of any substantive change to the payment arrangements between the health maintenance organization and physicians or providers. (V.T.I.C. Art. 20A.11, Sec. (c).)
Sec. 843.207. NOTICE OF CHANGE IN OPERATIONS. A health maintenance organization shall provide to its enrollees reasonable notice of any material adverse change in the operation of the health maintenance organization that will directly affect the enrollees. (V.T.I.C. Art. 20A.11, Sec. (e).)
Sec. 843.208. CANCELLATION OR NONRENEWAL OF COVERAGE. A health maintenance organization may cancel or refuse to renew the coverage of an enrollee only for:
(1) failure to pay the charges for the coverage; or
(2) another reason prescribed by commissioner rule. (V.T.I.C. Art. 20A.14, Sec. (c).)
[Sections 843.209-843.250 reserved for expansion]
SUBCHAPTER G. DISPUTE RESOLUTION
Sec. 843.251. COMPLAINT SYSTEM REQUIRED; COMMISSIONER RULES AND EXAMINATION. (a) A health maintenance organization shall implement and maintain a complaint system that provides reasonable procedures to resolve an oral or written complaint initiated by a complainant concerning health care services. The complaint system must include a process for the notice and appeal of a complaint.
(b) The commissioner may adopt reasonable rules as necessary or proper to implement the provisions of this subchapter relating to the complaint system and administer matters relating to the complaint system.
(c) The commissioner may examine a complaint system for compliance with this subchapter and may require the health maintenance organization to make corrections as the commissioner considers necessary. (V.T.I.C. Art. 20A.12, Secs. (a), (b), (r).)
Sec. 843.252. COMPLAINT INITIATION AND INITIAL RESPONSE; DEADLINES FOR RESPONSE AND RESOLUTION. (a) If a complainant notifies a health maintenance organization of a complaint, the health maintenance organization, not later than the fifth business day after the date of receiving the complaint, shall send to the complainant a letter acknowledging the date of receipt of the complaint.
(b) The letter required under Subsection (a) must:
(1) include a description of the health maintenance organization's complaint procedures and time frames; and
(2) if the complaint is made orally, be accompanied by a one-page complaint form that prominently and clearly states that the form must be returned to the health maintenance organization for prompt resolution of the complaint.
(c) A health maintenance organization shall acknowledge, investigate, and resolve a complaint not later than the 30th calendar day after the date the health maintenance organization receives the written complaint or one-page complaint form from the complainant.
(d) Subsections (a)-(c) do not apply to a complaint concerning an emergency or a denial of continued hospitalization. A health maintenance organization shall investigate and resolve a complaint concerning an emergency or a denial of continued hospitalization:
(1) in accordance with the medical or dental immediacy of the case; and
(2) not later than one business day after the health maintenance organization receives the complaint. (V.T.I.C. Art. 20A.12, Secs. (c), (e), (f).)
Sec. 843.253. COMPLAINT INVESTIGATION AND RESOLUTION. (a) A health maintenance organization shall investigate each complaint received in accordance with the health maintenance organization's policies and in compliance with this chapter.
(b) After a health maintenance organization has investigated a complaint, the health maintenance organization shall issue a response letter to the complainant within the time prescribed by Section 843.252(c) that:
(1) explains the health maintenance organization's resolution of the complaint;
(2) states the specific medical and contractual reasons for the resolution;
(3) states the specialization of any physician or other provider consulted; and
(4) contains a complete description of the process for appeal, including the deadlines for the appeals process and the deadlines for the final decision on the appeal. (V.T.I.C. Art. 20A.12, Secs. (d), (g).)
Sec. 843.254. APPEAL TO COMPLAINT APPEAL PANEL; DEADLINES. (a) A health maintenance organization shall provide an appeals process for a complainant who is not satisfied with the resolution of the complaint. The appeals process must include the right of the complainant to:
(1) appear in person before a complaint appeal panel at the site at which the enrollee normally receives health care services or at another site agreed to by the complainant; or
(2) address a written appeal to the complaint appeal panel.
(b) The health maintenance organization shall send an acknowledgment letter to the complainant not later than the fifth business day after the date the written request for appeal is received.
(c) The health maintenance organization shall complete the appeals process not later than the 30th calendar day after the date the written request for appeal is received. (V.T.I.C. Art. 20A.12, Secs. (h), (i).)
Sec. 843.255. COMPOSITION OF COMPLAINT APPEAL PANEL. (a) A health maintenance organization shall appoint members to a complaint appeal panel to advise the health maintenance organization on the resolution of a disputed decision appealed by a complainant.
(b) A complaint appeal panel shall be composed of an equal number of health maintenance organization staff members, physicians or other providers, and enrollees. A member of a complaint appeal panel may not have been previously involved in the disputed decision.
(c) The physicians or other providers on a complaint appeal panel must have experience in the area of care that is in dispute and must be independent of any physician or provider who made any previous determination. If specialty care is in dispute, the complaint appeal panel must include a person who is a specialist in the field of care to which the appeal relates.
(d) The enrollee members of a complaint appeal panel may not be employees of the health maintenance organization. (V.T.I.C. Art. 20A.12, Sec. (j).)
Sec. 843.256. INFORMATION PROVIDED TO COMPLAINANT RELATING TO COMPLAINT APPEAL PANEL. Not later than the fifth business day before the date a complaint appeal panel is scheduled to meet, unless the complainant agrees otherwise, the health maintenance organization shall provide to the complainant or the complainant's designated representative:
(1) any documentation to be presented to the complaint appeal panel by the health maintenance organization staff;
(2) the specialization of any physicians or providers consulted during the investigation; and
(3) the name and affiliation of each health maintenance organization representative on the complaint appeal panel. (V.T.I.C. Art. 20A.12, Sec. (k).)
Sec. 843.257. RIGHTS OF COMPLAINANT AT COMPLAINT APPEAL PANEL MEETING. A complainant, or a designated representative if the enrollee is a minor or is disabled, is entitled to:
(1) appear in person before the complaint appeal panel;
(2) present alternative expert testimony; and
(3) request the presence of and question any person responsible for making the disputed decision that resulted in the appeal. (V.T.I.C. Art. 20A.12, Sec. (l).)
Sec. 843.258. APPEAL INVOLVING ONGOING EMERGENCY OR CONTINUED HOSPITALIZATION. (a) The investigation and resolution of an appeal of a complaint relating to an ongoing emergency or denial of continued hospitalization shall be concluded:
(1) in accordance with the medical or dental immediacy of the case; and
(2) not later than one business day after the complainant's request for appeal is received.
(b) Because of the ongoing emergency or continued hospitalization and at the request of the complainant, the health maintenance organization shall provide, instead of a complaint appeal panel, a review by a physician or provider who:
(1) has not previously reviewed the case; and
(2) is of the same or a similar specialty as the physician or provider who would typically manage the medical condition, procedure, or treatment under consideration for review in the appeal.
(c) The physician or provider reviewing the appeal may interview the patient or the patient's designated representative and shall decide the appeal.
(d) The physician or provider may deliver initial notice of the decision on the appeal orally if the physician or provider subsequently provides written notice of the decision not later than the third day after the date of the decision.
(e) The investigation and resolution of an appeal after emergency care has been provided shall be conducted in accordance with the procedures otherwise established under this subchapter, including the right to review by a complaint appeal panel. (V.T.I.C. Art. 20A.12, Sec. (m).)
Sec. 843.259. NOTICE OF DECISION ON APPEAL. (a) A health maintenance organization shall include in a notice of the final decision on an appeal a statement of the specific medical determination, clinical basis, and contractual criteria used to reach the final decision.
(b) The notice must include the toll-free telephone number and address of the department. (V.T.I.C. Art. 20A.12, Sec. (n).)
Sec. 843.260. RECORD OF COMPLAINTS. (a) A health maintenance organization shall maintain a complaint and appeal log regarding each complaint.
(b) A health maintenance organization shall maintain a record of and documentation on each complaint, complaint proceeding, and action taken on a complaint until the third anniversary of the date the complaint was received.
(c) A complainant is entitled to a copy of the record of the complainant's complaint and any proceeding relating to that complaint.
(d) The department, during any investigation of a health maintenance organization, may review documentation maintained under Subsection (b) regarding a complaint and action taken on the complaint. (V.T.I.C. Art. 20A.12, Secs. (o), (p), (q).)
Sec. 843.261. SPECIAL PROVISIONS FOR APPEALS OF ADVERSE DETERMINATIONS. (a) A health maintenance organization shall implement and maintain an internal appeal system that:
(1) provides reasonable procedures for the resolution of an oral or written appeal concerning dissatisfaction or disagreement with an adverse determination; and
(2) includes procedures for notification, review, and appeal of an adverse determination in accordance with Article 21.58A.
(b) An appeal must be initiated by an enrollee, a person acting on behalf of an enrollee, or an enrollee's provider of record.
(c) When an enrollee, a person acting on behalf of an enrollee, or an enrollee's provider of record expresses orally or in writing any dissatisfaction or disagreement with an adverse determination, the health maintenance organization or utilization review agent shall:
(1) consider the expression of dissatisfaction or disagreement as an appeal of the adverse determination; and
(2) review and resolve the appeal in accordance with Article 21.58A.
(d) A health maintenance organization may integrate its appeal procedures related to adverse determinations with the complaint and appeal procedures established by the health maintenance organization under Section 843.251 and otherwise governed by this subchapter only if the procedures related to adverse determinations comply with this section and Article 21.58A. (V.T.I.C. Art. 20A.12A, Secs. (b), (c), (d).)
[Sections 843.262-843.280 reserved for expansion]
SUBCHAPTER H. GENERAL PROVISIONS REGARDING COMPLAINTS
Sec. 843.281. RETALIATORY ACTION PROHIBITED. (a) A health maintenance organization may not engage in retaliatory action, including refusal to renew or cancellation of coverage, against a group contract holder or enrollee because the group or enrollee or a person acting on behalf of the group or enrollee has filed a complaint against the health maintenance organization or appealed a decision of the health maintenance organization.
(b) A health maintenance organization may not engage in retaliatory action, including refusal to renew or termination of a contract, against a physician or provider because the physician or provider has, on behalf of an enrollee, reasonably filed a complaint against the health maintenance organization or appealed a decision of the health maintenance organization. (V.T.I.C. Art. 20A.14, Sec. (j), as added Acts 75th Leg., R.S., Ch. 1026; Sec. (k).)
Sec. 843.282. SUBMITTING COMPLAINTS TO DEPARTMENT. (a) Any person, including a person who has attempted to resolve a complaint through a health maintenance organization's complaint system process and is dissatisfied with the resolution, may submit a complaint to the department alleging a violation of this chapter or Chapter 20A.
(b) The commissioner shall complete an investigation of a complaint against a health maintenance organization to determine whether a violation has occurred not later than the 60th day after the date the department receives the complaint and all information necessary for the commissioner to make a determination.
(c) The commissioner may extend the time necessary to complete an investigation if:
(1) additional information is needed;
(2) an on-site review is necessary;
(3) the health maintenance organization, the physician or provider, or the complainant does not provide all documentation necessary to complete the investigation; or
(4) other circumstances beyond the control of the department occur. (V.T.I.C. Art. 20A.12B.)
Sec. 843.283. POSTING OF INFORMATION ON COMPLAINT PROCESS REQUIRED. A contract between a health maintenance organization and a physician or provider must require the physician or provider to post, in the office of the physician or provider, a notice to enrollees on the process for resolving complaints with the health maintenance organization. The notice must include the department's toll-free telephone number for filing a complaint. (V.T.I.C. Art. 20A.18A, Sec. (i), as added Acts 75th Leg., R.S., Ch. 1026.)
[Sections 843.284-843.300 reserved for expansion]
SUBCHAPTER I. RELATIONS WITH PHYSICIANS AND PROVIDERS
Sec. 843.301. PRACTICE OF MEDICINE NOT AFFECTED. This chapter and Chapter 20A do not:
(1) authorize any person, other than a licensed physician or practitioner of the healing arts, acting within the scope of the person's license, to engage directly or indirectly in the practice of medicine or a healing art; or
(2) authorize any person to regulate, interfere with, or intervene in any manner in the practice of medicine or a healing art. (V.T.I.C. Art. 20A.29.)
Sec. 843.302. DISCLOSURE OF APPLICATION PROCEDURES AND QUALIFICATION REQUIREMENTS TO PHYSICIAN OR PROVIDER. A health maintenance organization shall, on request, make available and disclose to a physician or provider written application procedures and qualification requirements for contracting with the health maintenance organization. (V.T.I.C. Art. 20A.18A, Sec. (a) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.303. DENIAL OF INITIAL CONTRACT TO PHYSICIAN OR PROVIDER. (a) A health maintenance organization that denies a contract to a physician or provider who initially applies to contract with the health maintenance organization to provide health care services on behalf of the health maintenance organization shall provide to the applicant written notice of the reasons the initial application was denied.
(b) Unless otherwise limited by Article 21.52B, this section does not prohibit a health maintenance organization from rejecting an initial application from a physician or provider based on the determination that the plan has sufficient qualified physicians or providers. (V.T.I.C. Art. 20A.18A, Sec. (a) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.304. EXCLUSION OF PROVIDER BASED ON TYPE OF LICENSE PROHIBITED. (a) A provider licensed or otherwise authorized to practice in this state may not be denied the opportunity to participate in providing health care services that are delivered by a health maintenance organization and that are within the scope of the provider's license or authorization solely because of the type of license or authorization held by the provider.
(b) If a hospital, facility, agency, or supplier is certified by the Medicare program, Title XVIII of the Social Security Act (42 U.S.C. Section 1395 et seq.), or accredited by the Joint Commission on Accreditation of Healthcare Organizations or another national accrediting body, a health maintenance organization shall accept that certification or accreditation.
(c) This section does not require that a health maintenance organization:
(1) use a particular type of provider in its operation;
(2) accept each provider of a category or type, except as provided by Article 21.52B; or
(3) contract directly with providers of a particular category or type.
(d) This section does not limit a health maintenance organization's authority to establish the terms under which health care services are provided by providers.
(e) A provider must comply with the terms established by the health maintenance organization for the provision of health services and for designation as a provider by the health maintenance organization. (V.T.I.C. Art. 20A.06, Sec. (a) (part); Art. 20A.14, Sec. (g).)
Sec. 843.305. ANNUAL APPLICATION PERIOD FOR PHYSICIANS AND PROVIDERS TO CONTRACT. (a) This section applies only to a health maintenance organization that provides coverage for health care services through:
(1) one or more physicians or providers who are not partners or employees of the health maintenance organization; or
(2) one or more physicians or providers who are not owned or operated by the health maintenance organization.
(b) A health maintenance organization shall provide a period of 20 calendar days each calendar year during which any physician or provider in a service area may, under the terms established by the health maintenance organization for the provision of services and the designation of physicians and providers, apply to participate in providing health care services.
(c) A health maintenance organization that denies the application of a physician or provider shall notify the physician or provider in writing of the reason for the denial.
(d) This section does not require that a health maintenance organization:
(1) use a particular type of physician or provider in its operation;
(2) accept a physician or provider of a category or type that does not meet the practice standards and qualifications established by the health maintenance organization; or
(3) contract directly with physicians or providers of a particular category or type. (V.T.I.C. Art. 20A.14, Sec. (h).)
Sec. 843.306. TERMINATION OF PARTICIPATION; ADVISORY REVIEW PANEL. (a) Before terminating a contract with a physician or provider, a health maintenance organization shall provide to the physician or provider a written explanation of the reasons for termination.
(b) On request, before the effective date of the termination and within a period not to exceed 60 days, a physician or provider is entitled to a review by an advisory review panel of the health maintenance organization's proposed termination, except in a case involving:
(1) imminent harm to patient health;
(2) an action by a state medical or dental board, another medical or dental licensing board, or another licensing board or government agency that effectively impairs the physician's or provider's ability to practice medicine, dentistry, or another profession; or
(3) fraud or malfeasance.
(c) An advisory review panel must:
(1) be composed of physicians and providers who are appointed to serve on the standing quality assurance committee or utilization review committee of the health maintenance organization; and
(2) include, if available, at least one representative of the physician's or provider's specialty or a similar specialty.
(d) The health maintenance organization must consider, but is not bound by, the recommendation of the advisory review panel.
(e) The health maintenance organization on request shall provide to the affected physician or provider a copy of the recommendation of the advisory review panel and the health maintenance organization's determination. (V.T.I.C. Art. 20A.18A, Sec. (b), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.307. EXPEDITED REVIEW PROCESS ON TERMINATION OR DESELECTION. On request by the physician or provider, a physician or provider whose participation in a health care plan is being terminated or who is deselected is entitled to an expedited review process by the health maintenance organization. (V.T.I.C. Art. 20A.18A, Sec. (d) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.308. NOTIFICATION OF PATIENTS OF DESELECTED PHYSICIAN OR PROVIDER. (a) Except as provided by Subsection (b), if a physician or provider is deselected for a reason other than the request of the physician or provider, a health maintenance organization may not notify patients of the deselection until the effective date of the deselection or the advisory review panel makes a formal recommendation.
(b) If the contract of a physician or provider is deselected for a reason related to imminent harm, a health maintenance organization may notify patients immediately. (V.T.I.C. Art. 20A.18A, Sec. (d) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.309. CONTRACTS WITH PHYSICIANS OR PROVIDERS: NOTICE TO CERTAIN ENROLLEES OF TERMINATION OF PHYSICIAN OR PROVIDER PARTICIPATION IN PLAN. A contract between a health maintenance organization and a physician or provider must provide that reasonable advance notice shall be given to an enrollee of the impending termination from the plan of a physician or provider who is currently treating the enrollee. (V.T.I.C. Art. 20A.18A, Sec. (c) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.310. CONTRACTS WITH PHYSICIANS OR PROVIDERS: CERTAIN INDEMNITY CLAUSES PROHIBITED. A contract between a health maintenance organization and a physician or provider may not contain a clause purporting to indemnify the health maintenance organization for any liability in tort resulting from an act or omission of the health maintenance organization. (V.T.I.C. Art. 20A.18A, Sec. (f), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.311. CONTRACTS WITH PODIATRISTS. A contract between a health maintenance organization and a podiatrist licensed by the Texas State Board of Podiatric Medical Examiners must provide that:
(1) the podiatrist may request, and the health maintenance organization shall provide not later than the 30th day after the date of the request, a copy of the coding guidelines and payment schedules applicable to the compensation that the podiatrist will receive under the contract for services;
(2) the health maintenance organization may not unilaterally make material retroactive revisions to the coding guidelines and payment schedules; and
(3) the podiatrist may, while practicing within the scope of the law regulating podiatry, provide x-rays and nonprefabricated orthotics covered by the evidence of coverage. (V.T.I.C. Art. 20A.18A, Sec. (j), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.312. PHYSICIAN ASSISTANTS AND ADVANCED PRACTICE NURSES. (a) A health maintenance organization may not refuse a request by a physician participating in the health maintenance organization delivery network and a physician assistant or advanced practice nurse who is authorized by the physician to provide care under Subchapter B, Chapter 157, Occupations Code, to identify a physician assistant or advanced practice nurse as a provider in the network.
(b) A health maintenance organization may refuse a request under Subsection (a) if the physician assistant or advanced practice nurse does not meet the quality of care standards previously established by the health maintenance organization for participation in the network by physician assistants and advanced practice nurses. (V.T.I.C. Art. 20A.14, Sec. (i), as added Acts 75th Leg., R.S., Ch. 1260.)
Sec. 843.313. ECONOMIC PROFILING. (a) A health maintenance organization that conducts or uses economic profiling of physicians or providers participating in the health maintenance organization delivery network shall make available to a network physician or provider on request that physician's or provider's economic profile, including the standards by which the physician or provider is measured.
(b) The use of an economic profile must recognize the characteristics of a physician's or provider's practice that may account for variations from expected costs. (V.T.I.C. Art. 20A.18A, Sec. (h), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.314. INDUCEMENT TO LIMIT MEDICALLY NECESSARY SERVICES PROHIBITED. (a) A health maintenance organization may not use a financial incentive or make a payment to a physician or provider if the incentive or payment acts directly or indirectly as an inducement to limit medically necessary services.
(b) This section does not prohibit the use of capitation as a method of payment. (V.T.I.C. Art. 20A.14, Sec. (l).)
Sec. 843.315. PAYMENT OF CAPITATION; ASSIGNMENT OF PRIMARY CARE PHYSICIAN OR PROVIDER. (a) This section applies to a health maintenance organization that to any extent uses capitation as a method of compensation.
(b) A health maintenance organization shall begin payment of capitated amounts to an enrollee's primary care physician or primary care provider, computed from the date of enrollment, not later than the 60th day after the date the enrollee selects or is assigned a primary care physician or primary care provider.
(c) If selection or assignment of a primary care physician or primary care provider does not occur at enrollment, capitated amounts that would have been paid to a selected or assigned primary care physician or primary care provider if a selection or assignment had been made shall be reserved as a capitated amount payable until the enrollee makes a selection or the health maintenance organization assigns a primary care physician or primary care provider.
(d) If an enrollee does not select a primary care physician or primary care provider at the time of application or enrollment, a health maintenance organization may assign the enrollee to a primary care physician or primary care provider.
(e) A primary care physician or primary care provider assigned under Subsection (d) must be located within the zip code nearest the enrollee's residence or place of employment.
(f) Subject to Subsection (e), the health maintenance organization shall make the assignment in a manner that results in a fair and equal distribution of enrollees among the health maintenance organization delivery network's primary care physicians or primary care providers.
(g) A health maintenance organization shall inform an enrollee of:
(1) the name, address, and telephone number of a primary care physician or primary care provider to whom the enrollee has been assigned under Subsection (d); and
(2) the enrollee's right to select a different primary care physician or primary care provider.
(h) At any time, an enrollee is entitled to reject the primary care physician or primary care provider assigned and select another physician or provider from the list of primary care physicians or primary care providers for the health maintenance organization delivery network. A rejection by an enrollee of an assigned physician or provider is not a change in provider for purposes of the limitation described by Section 843.203.
(i) A health maintenance organization shall notify a physician or provider of an enrollee's selection of that person as the primary care physician or primary care provider, or of the assignment of the enrollee to that physician or provider by the health maintenance organization, not later than the 30th working day after the date of the selection or assignment. (V.T.I.C. Art. 20A.18A, Sec. (e) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.316. ALTERNATIVE CAPITATION SYSTEM. As an alternative to the procedures prescribed by Section 843.315, a health maintenance organization may request approval from the department of a capitation payment system that ensures:
(1) immediate availability and accessibility of a primary care physician or primary care provider; and
(2) payment to a primary care physician or primary care provider of a capitated amount certified by a qualified actuary to be actuarially sufficient to compensate the primary care physician or primary care provider for the risk assumed. (V.T.I.C. Art. 20A.18A, Sec. (e) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.317. EXCLUSION OF PHYSICIAN OR PROVIDER BASED ON AFFILIATION WITH HEALTH MAINTENANCE ORGANIZATION PROHIBITED. A physician, health care provider, group of physicians or health care providers, or health care facility or institution may not exclude a physician or provider from staff privileges or a facility or institution solely because the physician or provider is associated with a health maintenance organization that holds a certificate of authority under this chapter. (V.T.I.C. Art. 20A.14, Sec. (e).)
Sec. 843.318. CERTAIN CONTRACTS OF PARTICIPATING PHYSICIAN OR PROVIDER NOT PROHIBITED. (a) This chapter and this code do not prohibit a physician or provider who is participating in a health maintenance organization delivery network, whether by contracting with a health maintenance organization under Section 843.101 or by subcontracting with a physician or provider in the health maintenance organization delivery network, from entering into a contractual arrangement authorized by this section within a health maintenance organization delivery network.
(b) A physician may contract to provide medical care or arrange to provide medical care through subcontracts with other physicians. A physician may contract to provide through another provider any service that is ancillary to the practice of medicine, other than hospital or other institutional or inpatient provider services.
(c) A provider may contract to provide, or arrange to provide through a subcontract with a similarly licensed provider, any health care service that the providers are licensed to provide, other than medical care.
(d) A provider may contract to provide, or arrange to provide through a subcontract with another provider, a health care service that the provider is not licensed to provide, other than medical care, if the contracted or subcontracted services constitute less than 15 percent of the total amount of services the provider is to provide or arrange to provide.
(e) A contract or subcontract authorized under this section may provide for compensation under:
(1) a fee-for-service arrangement;
(2) a risk-sharing arrangement; or
(3) a capitation arrangement under which a fixed predetermined payment is made in exchange for the provision of, or for the arrangement to provide and the guaranty of the provision of, a defined set of covered services to covered persons for a specified period without regard to the quantity of services actually provided. (V.T.I.C. Art. 20A.26, Secs. (f)(5), (6), (7), (8), (9).)
[Sections 843.319-843.335 reserved for expansion]
SUBCHAPTER J. PAYMENT OF CLAIMS TO PHYSICIANS AND PROVIDERS
Sec. 843.336. DEFINITION. In this subchapter, "clean claim" means a completed claim, as determined under department rules, submitted by a physician or provider for health care services under a health care plan. (V.T.I.C. Art. 20A.18B, Sec. (a).)
Sec. 843.337. ACKNOWLEDGMENT OF RECEIPT OF CLAIM. (a) A physician or provider for health care services under a health care plan may obtain acknowledgment of receipt of a claim for health care services under a health care plan by submitting the claim by United States mail, return receipt requested.
(b) A health maintenance organization or the contracted clearinghouse of the health maintenance organization that receives a claim electronically shall acknowledge receipt of the claim by an electronic transmission to the physician or provider and is not required to acknowledge receipt of the claim in writing. (V.T.I.C. Art. 20A.18B, Sec. (b).)
Sec. 843.338. DEADLINE FOR ACTION ON CLEAN CLAIMS. Not later than the 45th day after the date on which a health maintenance organization receives a clean claim from a physician or provider, the health maintenance organization shall:
(1) pay the total amount of the claim in accordance with the contract between the physician or provider and the health maintenance organization;
(2) pay the portion of the claim that is not in dispute and notify the physician or provider in writing why the remaining portion of the claim will not be paid; or
(3) notify the physician or provider in writing why the claim will not be paid. (V.T.I.C. Art. 20A.18B, Sec. (c).)
Sec. 843.339. DEADLINE FOR ACTION ON CERTAIN PRESCRIPTION BENEFIT CLAIMS. If a health maintenance organization or its designated agent authorizes treatment, a prescription benefit claim that is electronically adjudicated and electronically paid shall be paid not later than the 21st day after the date on which the treatment is authorized. (V.T.I.C. Art. 20A.18B, Sec. (d).)
Sec. 843.340. AUDITED CLAIMS. A health maintenance organization that acknowledges coverage of an enrollee under a health care plan but intends to audit a claim submitted by a physician or provider shall pay the charges submitted at 85 percent of the contracted rate on the claim not later than the 45th day after the date on which the health maintenance organization receives the claim from a physician or provider. Following completion of the audit, any additional payment due a physician or provider or any refund due the health maintenance organization shall be made not later than the 30th day after the later of the date that:
(1) the physician or provider receives notice of the audit results; or
(2) any appeal rights of the enrollee are exhausted. (V.T.I.C. Art. 20A.18B, Sec. (e).)
Sec. 843.341. CLAIMS PROCESSING PROCEDURES. (a) A health maintenance organization shall provide a participating physician or provider with copies of all applicable utilization review policies and claim processing policies or procedures, including required data elements and claim formats.
(b) A health maintenance organization may, by contract with a participating physician or provider, add or change the data elements that must be submitted with a claim from the physician or provider.
(c) Not later than the 60th day before the date of an addition or change in the data elements that must be submitted with a claim or any other change in a health maintenance organization's claim processing and payment procedures, the health maintenance organization shall provide written notice of the addition or change to each participating physician or provider. (V.T.I.C. Art. 20A.18B, Secs. (i), (j), (k).)
Sec. 843.342. VIOLATION OF CERTAIN CLAIMS PAYMENT PROVISIONS; ADMINISTRATIVE PENALTY. (a) A health maintenance organization that violates Section 843.338 or 843.340 is liable to a physician or provider for the full amount of billed charges submitted on the claim or the amount payable under the contracted penalty rate, less any amount previously paid or any charge for a service that is not covered by the health care plan.
(b) In addition to any other penalty or remedy authorized by this code, a health maintenance organization that violates Section 843.338 or 843.340 is subject to an administrative penalty under Chapter 84. The administrative penalty imposed under that chapter may not exceed $1,000 for each day the claim remains unpaid in violation of Section 843.338 or 843.340. (V.T.I.C. Art. 20A.18B, Secs. (f), (h).)
Sec. 843.343. ATTORNEY'S FEES. A physician or provider may recover reasonable attorney's fees in an action to recover payment under Section 843.342. (V.T.I.C. Art. 20A.18B, Sec. (g).)
Sec. 843.344. APPLICABILITY TO ENTITIES CONTRACTING WITH HEALTH MAINTENANCE ORGANIZATION. Sections 843.336-843.343 apply to a person with whom a health maintenance organization contracts to:
(1) process claims; or
(2) obtain the services of physicians and providers to provide health care services to enrollees. (V.T.I.C. Art. 20A.18B, Sec. (n).)
Sec. 843.345. EXCEPTIONS. Sections 843.336-843.344 do not apply to:
(1) a capitated payment required to be made to a physician or provider under an agreement to provide health care services, including medical care, under a health care plan; or
(2) a claim submitted by a physician or provider who is a member of the legislature. (V.T.I.C. Art. 20A.18B, Secs. (l), (m).)
Sec. 843.346. PAYMENT OF CLAIMS. Subject to Sections 843.336-843.345, a health maintenance organization shall pay a physician or provider for health care services and benefits provided to an enrollee under the evidence of coverage and to which the enrollee is entitled under the terms of the evidence of coverage not later than:
(1) the 45th day after the date on which a claim for payment is received with the documentation reasonably necessary to process the claim; or
(2) if applicable, within the number of calendar days specified by written agreement between the physician or provider and the health maintenance organization. (V.T.I.C. Art. 20A.09, Sec. (j) (part), as amended Acts 75th Leg., R.S., Ch. 1026.)
[Sections 843.347-843.360 reserved for expansion]
SUBCHAPTER K. RELATIONS BETWEEN ENROLLEE AND PHYSICIAN
OR PROVIDER
Sec. 843.361. ENROLLEES HELD HARMLESS. A contract or other agreement between a health maintenance organization and a physician or provider must specify that the physician or provider will hold an enrollee harmless for payment of the cost of covered health care services if the health maintenance organization does not pay the physician or provider for those services. (V.T.I.C. Art. 20A.18A, Sec. (g), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.362. CONTINUITY OF CARE; OBLIGATION OF HEALTH MAINTENANCE ORGANIZATION. (a) In this section, "special circumstance" means a condition regarding which a treating physician or provider reasonably believes that discontinuing care by that physician or provider could cause harm to an enrollee who is a patient. Examples of an enrollee who has a special circumstance include an enrollee with a disability, acute condition, or life-threatening illness and an enrollee who is past the 24th week of pregnancy.
(b) Each contract between a health maintenance organization and a physician and provider must provide that termination of the contract, except for reason of medical competence or professional behavior, does not release the health maintenance organization from the obligation of continuing to reimburse a physician or provider providing medically necessary treatment at the time of termination to an enrollee who has a special circumstance in accordance with the dictates of medical prudence. Subject to Subsections (d) and (e), the health maintenance organization must provide continued reimbursement at not less than the contract rate in exchange for the enrollee's continued receipt of ongoing treatment from the physician or provider.
(c) The treating physician or provider shall identify a special circumstance. The treating physician or provider must:
(1) request that an enrollee be permitted to continue treatment under the physician's or provider's care; and
(2) agree not to seek payment from the enrollee of any amount for which the enrollee would not be responsible if the physician or provider continued to be included in the health maintenance organization delivery network.
(d) Except as provided by Subsection (e), this section does not extend the obligation of a health maintenance organization to reimburse a terminated physician or provider for ongoing treatment of an enrollee after:
(1) the 90th day after the effective date of the termination; or
(2) if the enrollee has been diagnosed with a terminal illness at the time of termination, the expiration of the nine-month period after the effective date of the termination.
(e) If an enrollee is past the 24th week of pregnancy at the time of termination, a health maintenance organization's obligation to reimburse a terminated physician or provider or, if applicable, an enrollee extends through delivery of the child and applies to immediate postpartum care and a follow-up checkup within the six-week period after delivery.
(f) A contract between a health maintenance organization and a physician or provider must provide procedures for resolving disputes regarding the necessity for continued treatment by a physician or provider. (V.T.I.C. Art. 20A.18A, Sec. (c) (part), as added Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.363. PROTECTED PHYSICIAN OR PROVIDER COMMUNICATIONS WITH PATIENTS. (a) A health maintenance organization may not, as a condition of a contract with a physician, dentist, or provider, or in any other manner, prohibit, attempt to prohibit, or discourage a physician, dentist, or provider from discussing with or communicating in good faith with a current, prospective, or former patient, or a person designated by a patient, with respect to:
(1) information or opinions regarding the patient's health care, including the patient's medical condition or treatment options;
(2) information or opinions regarding the terms, requirements, or services of the health care plan as they relate to the medical needs of the patient; or
(3) the termination of the physician's, dentist's, or provider's contract with the health care plan or the fact that the physician, dentist, or provider will otherwise no longer be providing medical care, dental care, or health care services under the health care plan.
(b) A health maintenance organization may not in any manner penalize, terminate, or refuse to compensate for covered services a physician, dentist, or provider for communicating in a manner protected by this section with a current, prospective, or former patient, or a person designated by a patient.
(c) A contract provision that violates this section is void.
(V.T.I.C. Art. 20A.14, Sec. (i), as added Acts 75th Leg., R.S., Ch. 1026; Art. 20A.18A, as added Acts 75th Leg., R.S., Ch. 735.)
[Sections 843.364-843.400 reserved for expansion]
SUBCHAPTER L. FINANCIAL REGULATION OF HEALTH MAINTENANCE
ORGANIZATIONS
Sec. 843.401. FIDUCIARY RESPONSIBILITY. A director, officer, member, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of the health maintenance organization is responsible for the funds in a fiduciary relationship to the enrollees. (V.T.I.C. Art. 20A.08.)
Sec. 843.402. OFFICERS' AND EMPLOYEES' BOND. (a) A health maintenance organization shall maintain in force in its own name a fidelity bond on its officers and employees in an amount of at least $100,000 or another amount prescribed by the commissioner.
(b) The fidelity bond must be issued by an insurer that holds a certificate of authority in this state. If, after notice and hearing, the commissioner determines that a fidelity bond is not available from an insurer that holds a certificate of authority in this state, the health maintenance organization may obtain a fidelity bond procured by a surplus lines agent resident in this state in compliance with Chapter 981.
(c) The fidelity bond must obligate the surety to pay any loss of money or other property the health maintenance organization sustains because of an act of fraud or dishonesty by an employee or officer of the health maintenance organization, acting alone or in concert with others, while employed or serving as an officer of the health maintenance organization.
(d) Instead of a fidelity bond, a health maintenance organization may deposit cash with the comptroller. The deposit must be maintained in the amount and is subject to the same conditions required for a fidelity bond under this section. (V.T.I.C. Art. 20A.30.)
Sec. 843.403. MINIMUM NET WORTH. (a) A health maintenance organization authorized to provide basic health care services shall maintain a minimum net worth of $1.5 million.
(b) A health maintenance organization authorized to provide limited health care services shall maintain a minimum net worth of $1 million.
(c) A health maintenance organization authorized to offer only a single health care service plan shall maintain a minimum net worth of $500,000.
(d) The minimum net worth required by this section may consist only of:
(1) money of the United States;
(2) bonds of this state;
(3) bonds or other evidences of indebtedness of the United States that are guaranteed as to principal and interest by the United States; or
(4) bonds or other interest-bearing evidences of indebtedness of a county or municipality of this state. (V.T.I.C. Art. 20A.13A.)
Sec. 843.4031. PHASE-IN PERIOD FOR MINIMUM NET WORTH. (a) Notwithstanding Section 843.403(a), a health maintenance organization authorized to provide basic health care services that holds a certificate of authority under this chapter issued before September 1, 1999, shall achieve and maintain a minimum net worth of:
(1) $500,000 not later than December 31, 2000;
(2) $1 million not later than December 31, 2001; and
(3) $1.5 million not later than December 31, 2002.
(b) Notwithstanding Section 843.403(b), a health maintenance organization authorized to provide limited health care services that holds a certificate of authority under this chapter issued before September 1, 1999, shall achieve and maintain a minimum net worth of:
(1) $300,000 not later than December 31, 2000;
(2) $600,000 not later than December 31, 2001; and
(3) $1 million not later than December 31, 2002.
(c) Notwithstanding Section 843.403(c), a health maintenance organization authorized to offer only a single health care service plan that holds a certificate of authority under this chapter issued before September 1, 1999, shall achieve and maintain a minimum net worth of:
(1) $150,000 not later than December 31, 2000;
(2) $300,000 not later than December 31, 2001; and
(3) $500,000 not later than December 31, 2002.
(d) This section expires January 1, 2003. (V.T.I.C. Art. 20A.13B.)
Sec. 843.404. ADDITIONAL NET WORTH REQUIREMENTS. (a) The commissioner may adopt rules or by rule establish guidelines requiring a health maintenance organization to maintain a specified net worth based on:
(1) the nature and kind of risks the health maintenance organization underwrites or reinsures;
(2) the premium volume of risks the health maintenance organization underwrites or reinsures;
(3) the composition, quality, duration, or liquidity of the health maintenance organization's investment portfolio;
(4) fluctuations in the market value of securities the health maintenance organization holds;
(5) the adequacy of the health maintenance organization's reserves;
(6) the number of individuals enrolled by the health maintenance organization; or
(7) other business risks.
(b) Rules adopted or guidelines established under this section must be designed to ensure the financial solvency of health maintenance organizations for the protection of enrollees. The rules or guidelines may provide for a health maintenance organization to comply with a risk-based net worth requirement established under this section in stages over a two-year period. (V.T.I.C. Art. 20A.13C.)
Sec. 843.405. DEPOSIT WITH COMPTROLLER. (a) Unless otherwise provided by this section, a health maintenance organization shall deposit with the comptroller cash or securities, or any combination of cash, securities, and other guarantees that are acceptable to the commissioner, in the amount prescribed by this section.
(b) The amount of a health maintenance organization's initial deposit or other guarantee must be $100,000 for a health maintenance organization offering basic health care services, $75,000 for a health maintenance organization offering limited health care services, and $50,000 for a health maintenance organization offering a single health care service plan.
(c) On or before March 15 of the year following the year in which the health maintenance organization receives a certificate of authority, it shall deposit with the comptroller an amount equal to the difference between the initial deposit and 100 percent of its estimated uncovered health care expenses for the first 12 months of operation.
(d) On or before March 15 of each subsequent year, a health maintenance organization shall deposit the amount of the difference between its total uncovered health care expenses, based on its annual statement from the previous year, and the total amount previously deposited and not withdrawn from the state treasury. For any subsequent year in which the amount of the difference specified by this subsection is zero or less, the commissioner may not require the health maintenance organization to make any additional deposit under this subsection.
(e) If, on application made not more than once in each calendar year by a health maintenance organization, the commissioner determines that the amount previously deposited by the health maintenance organization has exceeded the amount required to be on deposit by more than $50,000 for a continuous 12-month period, the commissioner shall allow the health maintenance organization to withdraw the portion of the deposit that exceeds by more than $50,000 the amount required to be on deposit, unless the commissioner determines that the release of a portion of the deposit could be hazardous to enrollees, creditors, or the public.
(f) If, on application, the commissioner determines that the amount previously deposited by a health maintenance organization continues to exceed the amount required to be on deposit, the commissioner shall allow the health maintenance organization to withdraw the portion of the deposit that exceeds the amount required to be on deposit, unless the commissioner determines that the release of that portion of the deposit could be hazardous to enrollees, creditors, or the public.
(g) On application by a health maintenance organization operating for more than one year under a certificate of authority, the commissioner may waive some or all of the requirements imposed by Subsection (b), (c), or (d) for any period if the commissioner determines that the waiver is justified because:
(1) the total amount of the deposit or other guarantee is equal to at least 25 percent of the health maintenance organization's estimated uncovered expenses for the next calendar year;
(2) the health maintenance organization's net worth is equal to at least 25 percent of its estimated uncovered expenses for the next calendar year;
(3) the health maintenance organization has a net worth of at least $5 million; or
(4) the health maintenance organization's sponsoring organization has a net worth of at least $5 million for each health maintenance organization whose uncovered expenses the sponsoring organization guarantees.
(h) If one or more of the requirements imposed by Subsection (b), (c), or (d) is waived, any amount previously deposited shall remain on deposit until released in whole or in part by the comptroller on order of the commissioner under Subsection (h).
(i) A health maintenance organization that has made a deposit with the comptroller may, at its option, withdraw the deposit or any part of the deposit after substituting a deposit of cash or securities of equal amount and value to the withdrawn deposit or portion of deposit. The commissioner must first approve any securities being substituted. (V.T.I.C. Art. 20A.13, Secs. (a), (b) (part), (d), (e), (f), (g), (h).)
Sec. 843.406. HAZARDOUS FINANCIAL CONDITION. (a) If the financial condition of a health maintenance organization indicates that the continued operation of the health maintenance organization could be hazardous to its enrollees or creditors or the public, the commissioner may, after notice and opportunity for hearing:
(1) suspend or revoke the health maintenance organization's certificate of authority; or
(2) order the health maintenance organization to take action reasonably necessary to correct the condition, including by:
(A) reducing by reinsurance the total amount of present and potential liability for benefits;
(B) reducing the volume of new business being accepted;
(C) reducing expenses by specified methods;
(D) suspending or limiting for a period the writing of new business; or
(E) increasing the health maintenance organization's capital and surplus by contribution.
(b) In a manner consistent with the purposes of this section, the commissioner by rule may establish:
(1) uniform standards and criteria for early warning that the continued operation of a health maintenance organization could be hazardous to the health maintenance organization's enrollees or creditors or the public; and
(2) standards for evaluating the financial condition of a health maintenance organization. (V.T.I.C. Art. 20A.19.)
Sec. 843.407. RECEIVERSHIP AND DELINQUENCY PROCEEDINGS. (a) In addition to all other remedies available by law, if the commissioner believes that a health maintenance organization or another person is insolvent or does not maintain the net worth required under Sections 843.403, 843.4031, and 843.404, the commissioner may bring an action in a Travis County district court to be named receiver in accordance with Section 843.157 and Article 21.28.
(b) The court may:
(1) find that a receiver should take charge of the assets of the health maintenance organization; and
(2) name the commissioner as the receiver of the health maintenance organization in accordance with Section 843.157 and Article 21.28.
(c) The operations and business of a health maintenance organization represent the business of insurance for purposes of Section 843.157 and Articles 21.28 and 21.28-A.
(d) Exclusive venue of receivership and delinquency proceedings for a health maintenance organization is in Travis County. (V.T.I.C. Art. 20A.31, Secs. (b), (c), (d), (e).)
Sec. 843.408. INSOLVENCY AND ALLOCATION TO OTHER HEALTH MAINTENANCE ORGANIZATIONS. (a) If a health maintenance organization becomes insolvent, the commissioner shall equitably allocate the insolvent health maintenance organization's group contracts and nongroup enrollees among all health maintenance organizations that operate within a portion of the insolvent health maintenance organization's service area. The commissioner shall allocate the group contracts by order. In making allocations, the commissioner shall consider the resources of each health maintenance organization.
(b) A successor health maintenance organization to which one or more groups are allocated shall offer each group the successor health maintenance organization's coverage at rates determined in accordance with the successor health maintenance organization's existing methodology or in accordance with that methodology as adjusted by the commissioner.
(c) A successor health maintenance organization to which nongroup enrollees are allocated shall offer each nongroup enrollee the successor health maintenance organization's existing coverage for individual or conversion coverage, as determined by the nongroup enrollee's type of coverage from the insolvent health maintenance organization, at rates determined in accordance with the successor health maintenance organization's existing methodology or in accordance with that methodology as adjusted by the commissioner. A successor health maintenance organization that does not offer direct nongroup enrollment shall provide coverage at rates that reflect the average group rate of the successor health maintenance organization. (V.T.I.C. Art. 20A.13, Sec. (m).)
[Sections 843.409-843.434 reserved for expansion]
SUBCHAPTER M. HEALTH MAINTENANCE ORGANIZATION SOLVENCY
SURVEILLANCE COMMITTEE
Sec. 843.435. DEFINITION. In this subchapter, "committee" means the Health Maintenance Organization Solvency Surveillance Committee. (New.)
Sec. 843.436. COMPOSITION AND ADMINISTRATION. (a) The Health Maintenance Organization Solvency Surveillance Committee exists under the direction of the commissioner.
(b) The committee is composed of nine members appointed by the commissioner. Each member must be a health maintenance organization that holds a certificate of authority under this chapter or a public representative. If a member is a health maintenance organization or its holding company system, the commissioner shall appoint an officer or employee of the member to represent the member on the committee. No two individuals on the committee may be employees or officers of the same health maintenance organization or holding company system.
(c) Five of the members shall represent health maintenance organizations or their holding company systems. Of the health maintenance organization members, one shall represent a limited health care service plan and one shall represent a single health care service plan. The commissioner shall select the remaining health maintenance organization members after considering appropriate factors such as the varying categories of premium income and geographic location.
(d) A public representative may not:
(1) be an officer, director, or employee of a health maintenance organization, a health maintenance organization agent, or any other business entity regulated by the commissioner;
(2) be a person required to register under Chapter 305, Government Code; or
(3) be related to a person described by Subdivision (1) or (2) within the second degree by affinity or consanguinity.
(e) Qualifications for membership, terms of office, and reimbursement of expenses shall be governed by the approved plan of operation required under Section 843.437. (V.T.I.C. Art. 20A.36, Sec. (a) (part), as amended Acts 75th Leg., R.S., Ch. 1023; Sec. (a) (part), as amended Acts 75th Leg., R.S., Ch. 1026.)
Sec. 843.437. PLAN OF OPERATION. (a) The committee shall perform its functions under a plan of operation. The plan takes effect on the written approval of the commissioner.
(b) If the committee fails to submit a suitable plan of operation or if, after adoption of a plan, the committee fails to submit suitable amendments to the plan, the commissioner may, after notice and hearing, adopt rules as necessary to implement this subchapter. The rules continue in effect until modified by the commissioner or superseded by a plan submitted by the committee and approved by the commissioner. (V.T.I.C. Art. 20A.36, Sec. (a) (part), as amended Acts 75th Leg., R.S., Ch. 1023; Sec. (a) (part), as amended Acts 75th Leg., R.S., Ch. 1026; Sec. (e).)
Sec. 843.438. EXAMINATION AND REGULATION. The committee is subject to examination and regulation by the commissioner. Not later than May 1 of each year, the committee shall submit to the commissioner:
(1) a financial report for the preceding calendar year in a form approved by the commissioner; and
(2) a report of its activities during the preceding calendar year. (V.T.I.C. Art. 20A.36, Sec. (f).)
Sec. 843.439. IMMUNITY FROM LIABILITY. A health maintenance organization or its agents or employees, the committee or its agents, employees, or members, or the commissioner or the commissioner's representatives are not liable in a civil action for any act taken or not taken in good faith in the performance of powers and duties under this subchapter. (V.T.I.C. Art. 20A.36, Sec. (g).)
Sec. 843.440. GENERAL POWERS AND DUTIES. (a) The committee shall assist and advise the commissioner regarding:
(1) the detection and prevention of insolvency problems in health maintenance organizations; and
(2) any health maintenance organization placed in rehabilitation, liquidation, supervision, or conservation.
(b) The method of providing assistance and advice to the commissioner shall be in accordance with the committee's approved plan of operation.
(c) The committee shall file a record of its proceedings with the commissioner.
(d) In performing its duties, the committee may:
(1) enter into contracts as necessary or proper to implement this subchapter;
(2) take legal action as necessary to recover any unpaid assessments owed under Section 843.441;
(3) employ staff as necessary to conduct the financial transactions of the committee;
(4) assess each health maintenance organization for funds necessary to:
(A) enable the committee to perform its duties and other necessary or proper functions; and
(B) reimburse committee members for their actual expenses incurred in performing the functions of the committee; and
(5) perform other functions as necessary or proper under this subchapter.
(e) Reports regarding the financial condition of health maintenance organizations and the financial condition, administration, and status of health maintenance organizations in rehabilitation, liquidation, supervision, or conservation shall be provided to committee members at meetings. With regard to any person examined by the committee, committee members may not reveal:
(1) the condition of the examined person; or
(2) any information obtained in the course of a committee meeting that relates to the examined person. (V.T.I.C. Art. 20A.36, Secs. (b), (d).)
Sec. 843.441. ASSESSMENTS. (a) To provide funds for the administrative expenses of the commissioner regarding rehabilitation, liquidation, supervision, or conservation of an impaired health maintenance organization in this state, the committee, at the commissioner's direction, shall assess each health maintenance organization in the proportion that the gross premiums of the health maintenance organization that were written in this state during the preceding calendar year bear to the aggregate gross premiums that were written in this state by all health maintenance organizations, as provided to the committee by the commissioner after review of annual statements and other reports the commissioner considers necessary.
(b) Assessments to supplement or pay for administrative expenses of rehabilitation, liquidation, supervision, or conservation may be made only after the commissioner determines that:
(1) adequate assets of the impaired health maintenance organization are not immediately available for those administrative expenses; or
(2) use of those assets could be detrimental to rehabilitation, liquidation, supervision, or conservation.
(c) The commissioner may abate or defer an assessment in whole or in part if, in the opinion of the commissioner, payment of the assessment would endanger the ability of a health maintenance organization to fulfill its contractual obligations. If an assessment is abated or deferred in whole or in part, the amount of the abatement or deferral may be assessed against the remaining health maintenance organizations in a manner consistent with the basis for assessments provided by the approved plan of operation.
(d) The total of all assessments on a health maintenance organization may not exceed one-fourth of one percent of the health maintenance organization's gross premiums in any one calendar year.
(e) Notwithstanding any other provision of this subchapter, funds derived from an assessment made under this section may not be used for the expenses of administering the affairs of an impaired health maintenance organization while in supervision, rehabilitation, or conservation for more than 150 days. The committee may extend the period during which it makes assessments for the administrative expenses of an impaired health maintenance organization as it considers appropriate. (V.T.I.C. Art. 20A.36, Secs. (c), (h).)
[Sections 843.442-843.460 reserved for expansion]
SUBCHAPTER N. ENFORCEMENT
Sec. 843.461. ENFORCEMENT ACTIONS. (a) After notice and opportunity for a hearing, the commissioner may:
(1) suspend or revoke a certificate of authority issued to a health maintenance organization under this chapter;
(2) impose sanctions under Chapter 82;
(3) issue a cease and desist order under Chapter 83; or
(4) impose administrative penalties under Chapter 84.
(b) The commissioner may take an enforcement action listed in Subsection (a) against a health maintenance organization if the commissioner finds that the health maintenance organization:
(1) is operating in a manner that is:
(A) significantly contrary to its basic organizational documents or health care plan; or
(B) contrary to the manner described in and reasonably inferred from other information submitted under Section 843.078, 843.079, or 843.080;
(2) issues an evidence of coverage or uses a schedule of charges for health care services that does not comply with the requirements of Article 20A.09;
(3) does not meet the requirements of Section 843.082(1);
(4) provides a health care plan that does not provide or arrange for basic health care services, provides a limited health care service plan that does not provide or arrange for the plan's limited health care services, or provides a single health care service plan that does not provide or arrange for a single health care service;
(5) cannot fulfill its obligation to provide:
(A) health care services as required under its health care plan;
(B) limited health care services as required under its limited health care service plan; or
(C) a single health care service as required under its single health care service plan;
(6) is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees;
(7) has not implemented the complaint system required by Section 843.251 in a manner to resolve reasonably valid complaints;
(8) has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner or a person on behalf of the health maintenance organization has advertised or merchandised the health maintenance organization's services in an untrue, misrepresentative, misleading, deceptive, or untrue manner;
(9) would be hazardous to its enrollees if it continued in operation;
(10) has not complied substantially with this chapter or Chapter 20A or a rule adopted under this chapter or Chapter 20A; or
(11) has not taken corrective action the commissioner considers necessary to correct a failure to comply with this chapter, any applicable provision of this code, or any applicable rule or order of the commissioner not later than the 30th day after the date of notice of the failure or within any longer period specified in the notice and determined by the commissioner to be reasonable.
(c) The commissioner may suspend or revoke a certificate of authority only after complying with this section. (V.T.I.C. Art. 20A.20, Secs. (a), (b).)
Sec. 843.462. OPERATIONS DURING SUSPENSION OR AFTER REVOCATION OF CERTIFICATE OF AUTHORITY. (a) During the period a certificate of authority of a health maintenance organization is suspended, the health maintenance organization may not:
(1) enroll additional enrollees except newborn children or other newly acquired dependents of existing enrollees; or
(2) advertise or solicit in any way.
(b) After a certificate of authority of a health maintenance organization is revoked, the health maintenance organization:
(1) shall proceed, immediately following the effective date of the order of revocation, to conclude its affairs;
(2) may not conduct further business except as essential to the orderly conclusion of its affairs; and
(3) may not advertise or solicit in any way.
(c) Notwithstanding Subsection (b), the commissioner may, by written order, permit the further operation of the health maintenance organization to the extent that the commissioner finds necessary to serve the best interest of enrollees and to provide enrollees with the greatest practical opportunity to obtain continuing health care coverage. (V.T.I.C. Art. 20A.20, Secs. (c), (d).)
Sec. 843.463. INJUNCTIONS. If the commissioner believes that a health maintenance organization or another person is violating or has violated this chapter or Chapter 20A or a rule adopted under this chapter or Chapter 20A, the commissioner may bring an action in a Travis County district court to enjoin the violation and obtain other relief the court considers appropriate. (V.T.I.C. Art. 20A.31, Sec. (a).)
Sec. 843.464. CRIMINAL PENALTY. (a) A person, including an agent or officer of a health maintenance organization, commits an offense if the person:
(1) wilfully violates this chapter or Chapter 20A or a rule adopted under this chapter or Chapter 20A; or
(2) knowingly makes a false statement with respect to a report or statement required under this chapter or Chapter 20A.
(b) An offense under this section is a Class B misdemeanor. (V.T.I.C. Art. 20A.24.)
CHAPTER 844. CERTIFICATION OF CERTAIN NONPROFIT HEALTH
CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 844.001. DEFINITIONS
Sec. 844.002. EXCEPTIONS
Sec. 844.003. EXCEPTIONS TO TEXAS HEALTH MAINTENANCE
ORGANIZATION ACT
Sec. 844.004. RULES
Sec. 844.005. PROVISION OF CERTAIN SERVICES ON BEHALF
OF HEALTH MAINTENANCE ORGANIZATIONS
[Sections 844.006-844.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 844.051. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 844.052. CERTIFICATE APPLICATION; ELIGIBILITY REQUIREMENTS
Sec. 844.053. PROVISIONAL CERTIFICATE OF AUTHORITY
Sec. 844.054. POWERS AND DUTIES OF CERTIFICATE HOLDER
[Sections 844.055-844.100 reserved for expansion]
SUBCHAPTER C. PROHIBITED CONDUCT
Sec. 844.101. UNFAIR COMPETITION
CHAPTER 844. CERTIFICATION OF CERTAIN NONPROFIT HEALTH
CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 844.001. DEFINITIONS. In this chapter:
(1) "Approved nonprofit health corporation" means a nonprofit health corporation certified under Section 162.001, Occupations Code.
(2) "Certificate holder" means an approved nonprofit health corporation that holds a certificate of authority issued under this chapter.
(3) "Health care plan" has the meaning assigned by Section 843.002.
(4) "Health maintenance organization" means a health maintenance organization licensed under Chapter 843. (V.T.I.C. Art. 21.52F, Secs. 1(2), (3), (4), (5).)
Sec. 844.002. EXCEPTIONS. This chapter does not apply to:
(1) an approved nonprofit health corporation that contracts to arrange for or provide health care services on a fee-for-service basis;
(2) a contract entered into by a certificate holder to arrange for or provide health care services on a fee-for-service basis; or
(3) an activity exempt from regulation under Section 843.053 or 843.073. (V.T.I.C. Art. 21.52F, Sec. 2(b).)
Sec. 844.003. EXCEPTIONS TO TEXAS HEALTH MAINTENANCE ORGANIZATION ACT. This chapter may not be construed to alter the exceptions stated in Sections 843.053 and 843.073. (V.T.I.C. Art. 21.52F, Sec. 2(d).)
Sec. 844.004. RULES. Except as provided by Section 844.101(b), the commissioner shall adopt rules to implement this chapter. (V.T.I.C. Art. 21.52F, Sec. 7.)
Sec. 844.005. PROVISION OF CERTAIN SERVICES ON BEHALF OF HEALTH MAINTENANCE ORGANIZATIONS. (a) An approved nonprofit health corporation may arrange for or provide health care services on a risk-sharing or capitated risk arrangement on behalf of a health maintenance organization.
(b) An approved nonprofit health corporation is not required to obtain a certificate of authority under this chapter or under Chapter 843 to arrange for or provide health care services as provided by Subsection (a). (V.T.I.C. Art. 21.52F, Sec. 2(c).)
[Sections 844.006-844.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 844.051. CERTIFICATE OF AUTHORITY REQUIRED. An approved nonprofit health corporation may not arrange for or provide a health care plan to enrollees on a prepaid basis unless the corporation holds a certificate of authority issued under this chapter. (V.T.I.C. Art. 21.52F, Sec. 2(a).)
Sec. 844.052. CERTIFICATE APPLICATION; ELIGIBILITY REQUIREMENTS. (a) An approved nonprofit health corporation may apply to the department for a certificate of authority under this chapter.
(b) The commissioner may issue a certificate of authority only to an applicant that:
(1) meets the same requirements for the issuance of a certificate of authority that a health maintenance organization is required to meet under Chapter 843; and
(2) establishes accreditation by:
(A) the National Committee on Quality Assurance;
(B) the Joint Commission on Accreditation of Healthcare Organization's accreditation for health care networks; or
(C) an accrediting organization recognized by rule of the commissioner. (V.T.I.C. Art. 21.52F, Secs. 3, 4(a) (part).)
Sec. 844.053. PROVISIONAL CERTIFICATE OF AUTHORITY. The commissioner shall grant a provisional certificate of authority to an applicant if:
(1) the applicant has applied for accreditation from an accrediting organization described by Section 844.052(b)(2);
(2) the applicant is diligently pursuing accreditation;
(3) the accrediting organization has not denied the application for accreditation; and
(4) the applicant satisfies each other requirement of this chapter. (V.T.I.C. Art. 21.52F, Sec. 4(b).)
Sec. 844.054. POWERS AND DUTIES OF CERTIFICATE HOLDER. (a) A certificate holder has all the powers granted to and duties imposed on a health maintenance organization under the insurance laws of this state, including Chapter 843, and is subject to regulation and regulatory enforcement under those laws in the same manner as a health maintenance organization.
(b) A certificate holder shall maintain accreditation as described by Section 844.052(b)(2). (V.T.I.C. Art. 21.52F, Secs. 4(a) (part), 6.)
[Sections 844.055-844.100 reserved for expansion]
SUBCHAPTER C. PROHIBITED CONDUCT
Sec. 844.101. UNFAIR COMPETITION. (a) A certificate holder may not engage in unfair and disruptive provider hiring or contracting practices for the purpose of limiting competition from traditional community providers.
(b) The Texas State Board of Medical Examiners shall adopt rules to implement this section. (V.T.I.C. Art. 21.52F, Sec. 5.)
CHAPTER 845. STATEWIDE RURAL HEALTH CARE SYSTEM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 845.001. SHORT TITLE
Sec. 845.002. DEFINITIONS
Sec. 845.003. RURAL AREA DESIGNATION
Sec. 845.004. RULES
[Sections 845.005-845.050 reserved for expansion]
SUBCHAPTER B. SYSTEM
Sec. 845.051. STATEWIDE RURAL HEALTH CARE SYSTEM
Sec. 845.052. ORGANIZATION REQUIREMENTS
Sec. 845.053. APPLICATION OF TEXAS HEALTH MAINTENANCE
ORGANIZATION ACT
Sec. 845.054. LOCAL GOVERNMENT
Sec. 845.055. PROVISION OF ADMINISTRATIVE AND HEALTH CARE
SERVICES
Sec. 845.056. GIFTS AND GRANTS
Sec. 845.057. LIMITATION ON AUTHORITY OF PARTICIPATING
HOSPITAL PROVIDERS
Sec. 845.058. SALE OR DISSOLUTION OF SYSTEM
[Sections 845.059-845.100 reserved for expansion]
SUBCHAPTER C. BOARD OF DIRECTORS
Sec. 845.101. APPOINTMENT OF BOARD
Sec. 845.102. TERMS; VACANCY
Sec. 845.103. REMOVAL OF CERTAIN BOARD MEMBERS
Sec. 845.104. BOARD DUTIES
Sec. 845.105. RULES RELATING TO ADMINISTRATIVE AND HEALTH CARE
SERVICES
Sec. 845.106. OFFICERS
Sec. 845.107. EXECUTIVE COMMITTEE
Sec. 845.108. ADMINISTRATIVE SERVICES; PERSONNEL
Sec. 845.109. ADVISORY COMMITTEES
Sec. 845.110. OPEN MEETINGS AND RECORDS REQUIREMENTS
[Sections 845.111-845.150 reserved for expansion]
SUBCHAPTER D. STATE MANAGED CARE CONTRACTS
Sec. 845.151. CONTRACT AWARD
Sec. 845.152. PARTICIPATION REQUIREMENT
Sec. 845.153. REIMBURSEMENT AT STATE-DEFINED CAPITATION
RATE
Sec. 845.154. RIGHT OF STATE TO CANCEL CONTRACT ON SALE
OR DISSOLUTION
CHAPTER 845. STATEWIDE RURAL HEALTH CARE SYSTEM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 845.001. SHORT TITLE. This chapter may be cited as the Statewide Rural Health Care System Act. (V.T.I.C. Art. 20C.01.)
Sec. 845.002. DEFINITIONS. In this chapter:
(1) "Board" means the board of directors of the system.
(2) "Enrollee" means an individual entitled to receive health care services through a health care plan arranged for or provided by the system.
(3) "Health care services" has the meaning assigned by Section 843.002.
(4) "Hospital provider" means a county hospital, county hospital authority, hospital district, municipal hospital, or municipal hospital authority.
(5) "Local health care provider" means:
(A) a person licensed, registered, or certified as a health care practitioner in this state who resides or practices in a rural area in which the person provides health care services; or
(B) a general or specialty hospital that is not a hospital provider under this chapter.
(6) "Participating hospital provider" means a hospital provider that participates in the system.
(7) "Person" means an individual, professional association, professional corporation, partnership, limited liability corporation, limited liability partnership, or nonprofit corporation, including a nonprofit corporation certified under Section 162.001, Occupations Code.
(8) "Rural area" means:
(A) a county with a population of 50,000 or less;
(B) an area that is not delineated as an urbanized area by the United States Bureau of the Census; or
(C) any other area designated as rural by a rule adopted by the commissioner, subject to Section 845.003.
(9) "System" means the statewide rural health care system established under this chapter.
(10) "Territorial jurisdiction" means the geographical area in which a participating hospital provider is obligated by law to provide health care services. (V.T.I.C. Art. 20C.02, Subsec. (a).)
Sec. 845.003. RURAL AREA DESIGNATION. In determining whether to designate an area as a rural area under this chapter, the commissioner shall consider any area that is delineated as an urbanized area by the United States Bureau of the Census and:
(1) is contiguous with and not more than 10 miles away from a rural area described by Section 845.002(8)(A) or (B);
(2) is sparsely populated, compared to areas within a 10-mile radius that are delineated as urbanized areas by the United States Bureau of the Census;
(3) has not increased in population in any single calendar year in the seven years before the commissioner makes the designation; and
(4) in which emergency or primary care services:
(A) are limited or unavailable in accordance with network access standards imposed by the commissioner under Chapters 20A and 843; and
(B) would be made materially more accessible by allowing access to care in a contiguous area that is otherwise eligible to participate in the system. (V.T.I.C. Art. 20C.02, Subsec. (b).)
Sec. 845.004. RULES. The commissioner shall adopt rules as necessary to implement this chapter. (V.T.I.C. Art. 20C.15.)
[Sections 845.005-845.050 reserved for expansion]
SUBCHAPTER B. SYSTEM
Sec. 845.051. STATEWIDE RURAL HEALTH CARE SYSTEM. The commissioner shall designate a single organization as the statewide rural health care system to arrange for or provide health care services to enrollees who reside in rural areas. (V.T.I.C. Art. 20C.03; Art. 20C.04, Subsec. (a).)
Sec. 845.052. ORGANIZATION REQUIREMENTS. The system must:
(1) be a corporation organized under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes); and
(2) consist of a combination of two or more hospital providers, each of which:
(A) is a member of the corporation; and
(B) is located in a rural area. (V.T.I.C. Art. 20C.05, Subsec. (a).)
Sec. 845.053. APPLICATION OF TEXAS HEALTH MAINTENANCE ORGANIZATION ACT. (a) Except as otherwise provided by this section, if the system arranges for or provides health care services to enrollees in exchange for a predetermined payment per enrollee on a prepaid basis, the system must obtain a certificate of authority under Chapter 843 and meet each requirement imposed by that chapter.
(b) The commissioner by rule may provide exceptions to the application to the system of provisions of Chapter 20A or 843 that relate to mileage, distance, and network adequacy and scope.
(c) The system may fulfill the reserve requirements under Chapter 843 by purchasing reinsurance from insurance companies approved for that purpose by the commissioner. (V.T.I.C. Art. 20C.04, Subsecs. (b), (c), (d).)
Sec. 845.054. LOCAL GOVERNMENT. (a) The system is:
(1) a unit of local government that is a governmental unit for purposes of Chapter 101, Civil Practice and Remedies Code; and
(2) a local government for purposes of Chapter 102, Civil Practice and Remedies Code.
(b) The system may enter into interlocal cooperation contracts under Chapter 791, Government Code, and is a local government for purposes of that chapter. (V.T.I.C. Art. 20C.05, Subsecs. (b), (c).)
Sec. 845.055. PROVISION OF ADMINISTRATIVE AND HEALTH CARE SERVICES. (a) The system shall contract with or otherwise arrange for local health care provider networks composed of not more than 19 counties to deliver health care services to enrollees residing in the rural areas of the territorial jurisdiction of the participating hospital providers.
(b) If the local health care provider networks under contract or arrangement with the system as provided by Subsection (a) are unable to provide the type and quality of health care services required by the enrollees, the system may contract with health care practitioners who are not local health care providers.
(c) The system may:
(1) enter into a contract or joint venture to provide administrative services under this chapter;
(2) enter into an intergovernmental or interlocal agreement; or
(3) provide technical assistance and management services to local health care providers as necessary to deliver health care services. (V.T.I.C. Art. 20C.11, Subsecs. (b), (c), (d); Art. 20C.12, Subsecs. (b), (c).)
Sec. 845.056. GIFTS AND GRANTS. The system may accept gifts or grants of money or property to provide programs and services. (V.T.I.C. Art. 20C.13.)
Sec. 845.057. LIMITATION ON AUTHORITY OF PARTICIPATING HOSPITAL PROVIDERS. The participating hospital providers may exercise only the authority provided by Sections 845.058, 845.101, and 845.103. (V.T.I.C. Art. 20C.10, Subsec. (a) (part).)
Sec. 845.058. SALE OR DISSOLUTION OF SYSTEM. (a) The participating hospital providers may authorize, by a two-thirds vote, the sale of the system or substantially all of the assets of the system.
(b) Except as otherwise provided by law, on the sale or dissolution of the system or the sale of substantially all of the assets of the system, the net revenue shall be distributed equally to the participating hospital providers after payment of any outstanding liabilities incurred by the system. (V.T.I.C. Art. 20C.10, Subsecs. (a) (part), (b).)
[Sections 845.059-845.100 reserved for expansion]
SUBCHAPTER C. BOARD OF DIRECTORS
Sec. 845.101. APPOINTMENT OF BOARD. (a) The system is governed by a board of directors that consists of 18 members. Notwithstanding the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes), appointments to the board shall be made as provided by this section.
(b) The participating hospital providers shall elect, by a majority vote of the governing bodies of the participating hospital providers, six members who represent the participating hospital providers.
(c) The governor shall appoint:
(1) six members who reside in the territorial jurisdictions of the participating hospital providers, including:
(A) two members who represent employers;
(B) two members who are local government officials; and
(C) two members who are consumers of health care services; and
(2) six members who are licensed physicians who reside and practice in the territorial jurisdictions of the participating hospital providers, including at least three members who perform the general practice of medicine as their professional practice.
(d) The governor shall make appointments to the board under Subsection (c) in a manner that provides representation for the territorial jurisdictions of all participating hospital providers. (V.T.I.C. Art. 20C.06; Art. 20C.10, Subsec. (a) (part).)
Sec. 845.102. TERMS; VACANCY. (a) Members of the board serve staggered six-year terms. The terms of six members expire December 1 of each even-numbered year.
(b) A person may not be appointed to serve consecutive terms.
(c) A person may be appointed to serve a nonconsecutive term if the person left the board at the expiration of the person's previous term.
(d) If a vacancy occurs during a member's term, the same entity that appointed the member shall appoint a replacement to fill the unexpired term. (V.T.I.C. Art. 20C.07.)
Sec. 845.103. REMOVAL OF CERTAIN BOARD MEMBERS. The participating hospital providers may remove, by a two-thirds vote, any member of the board elected by the participating hospital providers under Section 845.101(b). (V.T.I.C. Art. 20C.10, Subsec. (a) (part).)
Sec. 845.104. BOARD DUTIES. The board shall:
(1) administer the system;
(2) adopt policies and procedures for the system that are consistent with the purposes of this chapter; and
(3) adopt rules for the holding of regular and special meetings. (V.T.I.C. Art. 20C.08, Subsec. (a) (part); Art. 20C.09, Subsec. (a).)
Sec. 845.105. RULES RELATING TO ADMINISTRATIVE AND HEALTH CARE SERVICES. The board may adopt rules to regulate the provision of administrative services and health care services by the system. (V.T.I.C. Art. 20C.11, Subsec. (a); Art. 20C.12, Subsec. (a).)
Sec. 845.106. OFFICERS. The board may elect officers as it considers appropriate. (V.T.I.C. Art. 20C.08, Subsec. (a) (part).)
Sec. 845.107. EXECUTIVE COMMITTEE. (a) The board may appoint an executive committee as determined by the board to be useful in conducting the business of the board.
(b) The board may delegate to the executive committee any responsibility considered reasonable by the board.
(c) An executive committee appointed under this section must consist of:
(1) two members who represent the participating hospital providers;
(2) two members who are community representatives, including employers, local government officials, or consumers of health care services; and
(3) two members who meet the requirements of Section 845.101(c)(2). (V.T.I.C. Art. 20C.08, Subsecs. (b), (c).)
Sec. 845.108. ADMINISTRATIVE SERVICES; PERSONNEL. (a) The board may, by majority vote:
(1) contract for administrative services; or
(2) hire an executive director, a consultant, an attorney or other professional, or other staff as necessary to perform the duties of the system.
(b) If the board hires an executive director for the system, the board shall delegate to the executive director the authority to hire staff for the system and may delegate to the executive director other duties determined by the board to be appropriate. (V.T.I.C. Art. 20C.08, Subsecs. (d), (e).)
Sec. 845.109. ADVISORY COMMITTEES. (a) The board may appoint a health care services advisory committee. The advisory committee must include members who represent rural, urban, and educational groups and organizations. The advisory committee, as directed by the board, shall meet and advise the board on any matter.
(b) The board may appoint other advisory committees as determined by the board to be appropriate.
(c) A member of an advisory committee appointed under this section is not entitled to compensation for service on the committee. (V.T.I.C. Art. 20C.08, Subsecs. (f), (g), (h).)
Sec. 845.110. OPEN MEETINGS AND RECORDS REQUIREMENTS. (a) Meetings of the board are open to the public in accordance with Chapter 551, Government Code. This subsection does not require the board to conduct an open meeting to deliberate:
(1) pricing or financial planning information relating to a bid or negotiation for arranging or providing services or product lines to another person if disclosure of the information would give the advantage to competitors;
(2) information relating to a proposed new service, product line, or marketing strategy;
(3) patient information made confidential under Chapter 159, Occupations Code, or Subchapter G, Chapter 241, Health and Safety Code; or
(4) information that relates to the credentialing of physicians or to peer review and that is made confidential under Subchapter A, Chapter 160, Occupations Code, or Subchapter G, Chapter 241, Health and Safety Code.
(b) The board shall keep a record of its proceedings in accordance with Chapter 551, Government Code. (V.T.I.C. Art. 20C.09, Subsecs. (b), (c).)
[Sections 845.111-845.150 reserved for expansion]
SUBCHAPTER D. STATE MANAGED CARE CONTRACTS
Sec. 845.151. CONTRACT AWARD. To the extent consistent with federal law, the state shall award to the system at least one of the state managed care contracts that are awarded to provide health care services to beneficiaries of the medical assistance program under Chapter 32, Human Resources Code, in the rural areas of the territorial jurisdiction of the participating hospital providers. (V.T.I.C. Art. 20C.14, Subsec. (a).)
Sec. 845.152. PARTICIPATION REQUIREMENT. As a requirement of participation in a state contract awarded under Section 845.151, the system must satisfactorily address the qualifications for arranging to provide health care services to beneficiaries of certain governmental health care programs as delineated in the contractor's request for proposal, including:
(1) readiness reviews and adequacy of credentialing, medical management, quality assurance, claims payment, information management, provider and patient education, and complaint and grievance procedures; and
(2) adequacy of physician and provider networks, including factors such as diversity, geographic accessibility, inclusion of physicians and other providers that have furnished a significant amount of Medicaid or charity care to beneficiaries, and tertiary and subspecialty services. (V.T.I.C. Art. 20C.14, Subsec. (b).)
Sec. 845.153. REIMBURSEMENT AT STATE-DEFINED CAPITATION RATE. (a) To the extent the system operates under a certificate of authority issued under Chapter 843, the Medicaid contracting agency shall reimburse the system at the state-defined capitation rate for each service area in which the system operates.
(b) The system is not required as a condition of participation in a state contract awarded under Section 845.151 to accept from the Medicaid contracting agency a capitation rate that is lower than the state-defined capitation rate for each service area in which the system operates. (V.T.I.C. Art. 20C.14, Subsecs. (c), (d).)
Sec. 845.154. RIGHT OF STATE TO CANCEL CONTRACT ON SALE OR DISSOLUTION. The state may cancel a contract awarded under this subchapter if the system is sold or dissolved. (V.T.I.C. Art. 20C.14, Subsec. (e).)
CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 846.001. DEFINITIONS
Sec. 846.002. APPLICABILITY OF CHAPTER
Sec. 846.003. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS
Sec. 846.004. LATE-PARTICIPATING EMPLOYEE OR DEPENDENT
Sec. 846.005. RULES; ORDERS
Sec. 846.006. APPEAL OF ORDERS
Sec. 846.007. PREMIUM RATES; ADJUSTMENTS
[Sections 846.008-846.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF
MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
Sec. 846.051. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 846.052. APPLICATION FOR INITIAL CERTIFICATE OF AUTHORITY
Sec. 846.053. ELIGIBILITY REQUIREMENTS FOR INITIAL
CERTIFICATE OF AUTHORITY
Sec. 846.054. ISSUANCE OF INITIAL CERTIFICATE OF AUTHORITY
Sec. 846.055. EXTENSION OF TERM OF INITIAL CERTIFICATE OF
AUTHORITY
Sec. 846.056. FINAL CERTIFICATE OF AUTHORITY
Sec. 846.057. DENIAL OF FINAL CERTIFICATE OF AUTHORITY
Sec. 846.058. DISQUALIFICATION
Sec. 846.059. FEES; SERVICE OF PROCESS
Sec. 846.060. SUSPENSION, REVOCATION, OR LIMITATION OF
CERTIFICATE OF AUTHORITY
Sec. 846.061. ACTION BY ATTORNEY GENERAL
[Sections 846.062-846.100 reserved for expansion]
SUBCHAPTER C. BOARD MEMBERS; OTHER OFFICERS AND PERSONNEL
Sec. 846.101. BOARD MEMBERS; NOTICE OF ELECTIONS
Sec. 846.102. DUTIES OF BOARD MEMBERS
Sec. 846.103. LIMITATION ON ACTION AGAINST BOARD MEMBER
Sec. 846.104. COMPENSATION OF BOARD MEMBERS
Sec. 846.105. OFFICERS; AGENTS
Sec. 846.106. COMPENSATION OF OFFICERS, AGENTS, AND
EMPLOYEES
Sec. 846.107. RECEIPT OF THING OF VALUE; CRIMINAL PENALTY
[Sections 846.108-846.150 reserved for expansion]
SUBCHAPTER D. POWERS AND DUTIES OF MULTIPLE EMPLOYER
WELFARE ARRANGEMENTS
Sec. 846.151. GENERAL POWERS
Sec. 846.152. FILING OF ORGANIZATIONAL DOCUMENTS
Sec. 846.153. REQUIRED FILINGS
Sec. 846.154. CASH RESERVE REQUIREMENTS
Sec. 846.155. ADJUSTMENT OF CONTRIBUTIONS
Sec. 846.156. WAIVER OR REDUCTION OF REQUIRED STOP-LOSS
INSURANCE OR CASH RESERVES
Sec. 846.157. RENEWAL OF CERTIFICATE; ADDITIONAL ACTUARIAL
REVIEW
Sec. 846.158. EXAMINATION OF MULTIPLE EMPLOYER WELFARE
ARRANGEMENTS
Sec. 846.159. NAME OF MULTIPLE EMPLOYER WELFARE ARRANGEMENT
Sec. 846.160. EVIDENCE OF EXISTENCE
[Sections 846.161-846.200 reserved for expansion]
SUBCHAPTER E. PROVISION OF COVERAGE
Sec. 846.201. BENEFITS ALLOWED
Sec. 846.202. PREEXISTING CONDITION PROVISION
Sec. 846.203. TREATMENT OF CERTAIN CONDITIONS AS PREEXISTING
PROHIBITED
Sec. 846.204. WAITING PERIOD PERMITTED
Sec. 846.205. CERTAIN LIMITATIONS OR EXCLUSIONS OF COVERAGE
PROHIBITED
Sec. 846.206. RENEWABILITY OF COVERAGE; CANCELLATION
Sec. 846.207. REFUSAL TO RENEW
Sec. 846.208. NOTICE TO COVERED PERSONS
Sec. 846.209. WRITTEN STATEMENT OF DENIAL, CANCELLATION,
OR REFUSAL TO RENEW
[Sections 846.210-846.250 reserved for expansion]
SUBCHAPTER F. PARTICIPATION IN COVERAGE
Sec. 846.251. PARTICIPATION CRITERIA
Sec. 846.252. COVERAGE REQUIREMENTS
Sec. 846.253. PROHIBITION ON EXCLUSION OF ELIGIBLE
EMPLOYEE OR DEPENDENT
Sec. 846.254. WRITTEN NOTICE TO EMPLOYEES COVERED
Sec. 846.255. DECLINING COVERAGE
Sec. 846.256. MINIMUM CONTRIBUTION OR PARTICIPATION
REQUIREMENTS
Sec. 846.257. ENROLLMENT; WAITING PERIOD
Sec. 846.258. COVERAGE FOR NEWBORN CHILDREN
Sec. 846.259. COVERAGE FOR ADOPTED CHILDREN
[Sections 846.260-846.300 reserved for expansion]
SUBCHAPTER G. MARKETING
Sec. 846.301. MARKETING REQUIREMENTS
Sec. 846.302. ADDITIONAL REPORTING REQUIREMENTS
Sec. 846.303. APPLICABILITY TO THIRD-PARTY ADMINISTRATOR
CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 846.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees or directors, as applicable, of a multiple employer welfare arrangement.
(2) "Employee welfare benefit plan" has the meaning assigned by Section 3(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002(1)).
(3) "Health benefit plan" includes any plan that provides benefits for health care services. The term does not include:
(A) accident-only or disability income insurance coverage, or a combination of accident-only and disability income insurance coverage;
(B) credit-only insurance coverage;
(C) disability insurance;
(D) coverage for a specified disease or illness;
(E) Medicare services under a federal contract;
(F) Medicare supplement and Medicare Select policies regulated in accordance with federal law;
(G) long-term care coverage or benefits, nursing home care coverage or benefits, home health care coverage or benefits, community-based care coverage or benefits, or any combination of those coverages or benefits;
(H) coverage that provides limited-scope dental or vision benefits;
(I) coverage provided by a single service health maintenance organization;
(J) workers' compensation insurance coverage or similar insurance coverage;
(K) coverage provided through a jointly managed trust authorized under 29 U.S.C. Section 141 et seq. that contains a plan of benefits for employees that is negotiated in a collective bargaining agreement governing wages, hours, and working conditions of the employees that is authorized under 29 U.S.C. Section 157;
(L) hospital indemnity or other fixed indemnity insurance coverage;
(M) reinsurance contracts issued on a stop-loss, quota-share, or similar basis;
(N) short-term major medical contracts;
(O) liability insurance coverage, including general liability insurance coverage and automobile liability insurance coverage;
(P) coverage issued as a supplement to liability insurance coverage;
(Q) automobile medical payment insurance coverage;
(R) coverage for on-site medical clinics;
(S) coverage that provides other limited benefits specified by federal regulations; or
(T) other coverage that is:
(i) similar to the coverage described by this subdivision under which benefits for medical care are secondary or incidental to other coverage benefits; and
(ii) specified in federal regulations.
(4) "Health status related factor" means:
(A) health status;
(B) medical condition, including both physical and mental illness;
(C) claims experience;
(D) receipt of health care;
(E) medical history;
(F) genetic information;
(G) evidence of insurability, including conditions arising out of acts of family violence; and
(H) disability.
(5) "Multiple employer welfare arrangement" has the meaning assigned by Section 3(40) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002(40)).
(6) "Organizational document" means the articles, bylaws, agreements, trusts, or other documents or instruments describing the rights and obligations of employers, employees, and beneficiaries with respect to a multiple employer welfare arrangement.
(7) "Participation criteria" means any criteria or rules established by an employer to determine the employees who are eligible for enrollment or continued enrollment under the terms of a health benefit plan.
(8) "Preexisting condition provision" means a provision that excludes or limits coverage for a disease or condition for a specified period after the effective date of coverage.
(9) "Waiting period" means a period established by a multiple employer welfare arrangement that must elapse before an individual who is a potential participating employee in a health benefit plan is eligible to be covered for benefits. (V.T.I.C. Art. 3.95-1, Subdivs. (4), (6), (7), (9) (part), (10) (part), (11), (12); Art. 3.95-1.6; Art. 3.95-2, Subsec. (b) (part); New.)
Sec. 846.002. APPLICABILITY OF CHAPTER. (a) In this section, "fully insured multiple employer welfare arrangement" means an arrangement that provides to its participating employees and beneficiaries benefits for which 100 percent of the liability has been assumed by an insurance company authorized to do business in this state.
(b) This chapter applies only to a multiple employer welfare arrangement that meets either or both of the following criteria:
(1) one or more of the employer members in the arrangement:
(A) is domiciled in this state; or
(B) has its principal headquarters or principal administrative office in this state; or
(2) the arrangement solicits an employer that:
(A) is domiciled in this state; or
(B) has its principal headquarters or principal administrative office in this state.
(c) This chapter does not apply to a fully insured multiple employer welfare arrangement during the period in which the arrangement is fully insured. The commissioner periodically may require proof that the arrangement is fully insured. (V.T.I.C. Art. 3.95-1, Subdivs. (5), (9) (part); Art. 3.95-2, Subsec. (a) (part).)
Sec. 846.003. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (a) A multiple employer welfare arrangement is exempt from the operation of all insurance laws of this state, except laws that are made applicable by their specific terms or as specified in this section or chapter.
(b) A multiple employer welfare arrangement is subject to the following laws:
(1) Subchapters C and D, Chapter 36;
(2) Section 38.001;
(3) Section 81.002;
(4) Chapter 82;
(5) Chapter 83;
(6) Chapter 801;
(7) Chapter 803;
(8) Chapter 804;
(9) Subchapter A, Chapter 805;
(10) Sections 841.701-841.702;
(11) Section 841.704;
(12) Section 841.259;
(13) Article 1.10D;
(14) Article 1.12;
(15) Article 1.13;
(16) Article 1.15;
(17) Article 1.16;
(18) Article 1.19;
(19) Article 1.35;
(20) Article 1.31;
(21) Article 3.56;
(22) Article 21.21;
(23) Article 21.28;
(24) Article 21.28A; and
(25) Article 21.28E.
(c) A multiple employer welfare arrangement is only considered an insurer for purposes of the laws described by this section. (V.T.I.C. Art. 3.95-13.)
Sec. 846.004. LATE-PARTICIPATING EMPLOYEE OR DEPENDENT. (a) For purposes of this chapter, an employee or dependent eligible for enrollment in a participating employer's health benefit plan is a late-participating employee or dependent if the individual requests enrollment after the expiration of:
(1) the initial enrollment period established under the terms of the first health benefit plan for which that employee or dependent was eligible through the participating employer; or
(2) an open enrollment period under Section 846.257.
(b) An employee or dependent is not a late-participating employee or dependent if the individual:
(1) was covered under another health benefit plan or self-funded employer health benefit plan at the time the individual was eligible to enroll;
(2) declined enrollment in writing, at the time of the initial eligibility for enrollment, stating that coverage under another health benefit plan or self-funded employer health benefit plan was the reason for declining enrollment;
(3) has lost coverage under the other health benefit plan or self-funded employer health benefit plan as a result of:
(A) the termination of employment;
(B) a reduction in the number of hours of employment;
(C) the termination of the other plan's coverage;
(D) the termination of contributions toward the premium made by the employer; or
(E) the death of a spouse or divorce; and
(4) requests enrollment not later than the 31st day after the date coverage under the other health benefit plan or self-funded employer health benefit plan terminates.
(c) An employee or dependent is also not a late-participating employee or dependent if the individual is:
(1) employed by an employer that offers multiple health benefit plans and the individual elects a different health benefit plan during an open enrollment period under Section 846.257;
(2) a spouse for whom a court has ordered coverage under a covered employee's plan and the request for enrollment of the spouse is made not later than the 31st day after the date the court order is issued; or
(3) a child for whom a court has ordered coverage under a covered employee's plan and the request for enrollment is made not later than the 31st day after the date the employer receives the court order. (V.T.I.C. Art. 3.95-1, Subdiv. (8); Art. 3.95-1.7.)
Sec. 846.005. RULES; ORDERS. (a) The commissioner may, on notice and opportunity for all interested persons to be heard, adopt rules and issue orders reasonably necessary to augment and implement this chapter.
(b) The commissioner shall adopt rules necessary to meet the minimum requirements of federal law and regulations. (V.T.I.C. Art. 3.95-15, Subsec. (a).)
Sec. 846.006. APPEAL OF ORDERS. A person affected by an order of the commissioner issued under this chapter may appeal that order by filing suit in a district court in Travis County under Subchapter D, Chapter 36. (V.T.I.C. Art. 3.95-15, Subsec. (c).)
Sec. 846.007. PREMIUM RATES; ADJUSTMENTS. (a) A multiple employer welfare arrangement may charge premiums in accordance with this section to the group of employees or dependents who meet the participation criteria and who do not decline coverage.
(b) A multiple employer welfare arrangement may not charge an adjustment to premium rates for individual employees or dependents for health status related factors or duration of coverage. Any adjustment must be applied uniformly to the rates charged for all participating employees and dependents of participating employees of the employer.
(c) Subsection (b) does not restrict the amount that an employer may be charged for coverage.
(d) A multiple employer welfare arrangement may establish premium discounts, rebates, or a reduction in otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention. A discount, rebate, or reduction established under this subsection does not violate Section 4(8), Article 21.21. (V.T.I.C. Art. 3.95-4.1, Subsec. (b) (part); Art. 3.95-4.6.)
[Sections 846.008-846.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF
MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
Sec. 846.051. CERTIFICATE OF AUTHORITY REQUIRED. A person may not establish or maintain an employee welfare benefit plan that is a multiple employer welfare arrangement in this state unless the arrangement obtains and maintains a certificate of authority issued under this chapter. (V.T.I.C. Art. 3.95-2, Subsec. (a) (part).)
Sec. 846.052. APPLICATION FOR INITIAL CERTIFICATE OF AUTHORITY. (a) A person who wants to establish an employee welfare benefit plan that is a multiple employer welfare arrangement must apply for an initial certificate of authority on an application form prescribed by the commissioner.
(b) The application form must be completed and submitted along with all information required by the commissioner, including:
(1) a copy of each organizational document;
(2) current financial statements of the arrangement;
(3) a fully detailed statement indicating the plan under which the arrangement proposes to transact business;
(4) an initial actuarial opinion in compliance with the requirements of Section 846.153(a)(2) and subject to Section 846.157(b); and
(5) a statement by the applicant certifying that the arrangement is in compliance with all applicable provisions of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).
(c) The application must be accompanied by proof of a fidelity bond that:
(1) protects against acts of fraud or dishonesty in servicing the multiple employer welfare arrangement;
(2) covers each person responsible for servicing the employee welfare benefit plan; and
(3) is in an amount equal to the greater of 10 percent of the premiums and contributions received by the arrangement or 10 percent of the benefits paid, during the preceding calendar year, with a minimum of $10,000 and a maximum of $500,000.
(d) A third-party administrator licensed to engage in business in this state is not required to submit a fidelity bond under Subsection (c).
(e) The commissioner shall promptly examine the application and documents submitted by the applicant and may:
(1) conduct any investigation that the commissioner considers necessary; and
(2) examine under oath any person interested in or connected with the multiple employer welfare arrangement. (V.T.I.C. Art. 3.95-2, Subsecs. (b) (part), (c).)
Sec. 846.053. ELIGIBILITY REQUIREMENTS FOR INITIAL CERTIFICATE OF AUTHORITY. (a) An applicant for an initial certificate of authority as a multiple employer welfare arrangement must meet the requirements of this section.
(b) The employers in the multiple employer welfare arrangement must be members of an association or group of five or more businesses that are in the same trade or industry, including closely related businesses that provide support, services, or supplies primarily to that trade or industry.
(c) If the employers in the multiple employer welfare arrangement are members of an association, the association must:
(1) be engaged in substantial activity for its members other than sponsorship of an employee welfare benefit plan; and
(2) have been in existence for at least two years before engaging in any activities relating to providing employee health benefits to its members.
(d) The employee welfare plan of the association or group in the multiple employer welfare arrangement must be controlled and sponsored directly by participating employers, participating employees, or both.
(e) The association or group of employers in the multiple employer welfare arrangement must be a not-for-profit organization.
(f) The multiple employer welfare arrangement must:
(1) have within its own organization adequate facilities and competent personnel, as determined by the commissioner, to administer the employee benefit plan; or
(2) have contracted with a third-party administrator licensed to engage in business in this state.
(g) The multiple employer welfare arrangement:
(1) must have applications from not fewer than five employers and must provide similar benefits for not fewer than 200 separate participating employees; and
(2) will have annual gross premiums of or contributions to the plan of not less than:
(A) $20,000 for a plan that provides only vision benefits;
(B) $75,000 for a plan that provides only dental benefits; and
(C) $200,000 for all other plans.
(h) The multiple employer welfare arrangement must possess a written commitment, binder, or policy for stop-loss insurance issued by an insurer authorized to do business in this state that provides:
(1) at least 30 days' notice to the commissioner of any cancellation or nonrenewal of coverage; and
(2) both specific and aggregate coverage with an aggregate retention of not more than 125 percent of the amount of expected claims for the next plan year and a specific retention amount annually determined by the actuarial opinion required by Section 846.153(a)(2).
(i) Both the specific and aggregate coverage required by Subsection (h)(2) must require all claims to be submitted within 90 days after the claim is incurred and provide a 12-month claims incurred period and a 15-month paid claims period for each policy year.
(j) The contributions must be established to fund at least 100 percent of the aggregate retention plus all other costs of the multiple employer welfare arrangements.
(k) The multiple employer welfare arrangement must establish a procedure for handling claims for benefits on dissolution of the arrangement.
(l) The multiple employer welfare arrangement must obtain the required bond. (V.T.I.C. Art. 3.95-2, Subsec. (d) (part).)
Sec. 846.054. ISSUANCE OF INITIAL CERTIFICATE OF AUTHORITY. (a) The commissioner shall issue an initial certificate of authority to a multiple employer welfare arrangement that meets the requirements of Section 846.053 not later than the 60th day after the date on which the application is filed.
(b) An initial certificate of authority is a temporary certificate issued for a one-year term.
(c) On receipt of the initial certificate of authority, the multiple employer welfare arrangement shall begin business. (V.T.I.C. Art. 3.95-2, Subsecs. (d) (part), (e).)
Sec. 846.055. EXTENSION OF TERM OF INITIAL CERTIFICATE OF AUTHORITY. The commissioner may extend the term of an initial certificate of authority for a period not to exceed one year if the commissioner determines that the multiple employer welfare arrangement is likely to meet the requirements of this chapter for a final certificate of authority within that period. The commissioner may not grant more than one extension of the initial certificate of authority regardless of the length of time for which an extension was granted. (V.T.I.C. Art. 3.95-2, Subsec. (i) (part).)
Sec. 846.056. FINAL CERTIFICATE OF AUTHORITY. (a) A multiple employer welfare arrangement that holds an initial certificate of authority must apply for a final certificate of authority not later than the first anniversary of the date of issuance of the initial certificate.
(b) The multiple employer welfare arrangement must file an application for a final certificate of authority on a form prescribed by the commissioner and furnish the information required by the commissioner. The application for a final certificate of authority must include only:
(1) the names and addresses of:
(A) the association or group of employers sponsoring the arrangement;
(B) the board members of the arrangement; and
(C) at least five employers, if the employers in the arrangement are not an association;
(2) proof of compliance with the bonding requirements;
(3) a copy of each plan document and each agreement with service providers; and
(4) a funding report containing:
(A) a statement certified by the board and an actuarial opinion that all applicable requirements of Section 846.153 have been met;
(B) an actuarial opinion describing the extent to which contributions or premium rates:
(i) are not excessive;
(ii) are not unfairly discriminatory; and
(iii) are adequate to provide for the payment of all obligations and the maintenance of required cash reserves and surplus by the arrangement;
(C) a statement of the current value of the assets and liabilities accumulated by the arrangement and a projection of the assets, liabilities, income, and expenses of the arrangement for the next 12-month period; and
(D) a statement of the costs to be charged for coverage, including an itemization of amounts for:
(i) administrative expenses;
(ii) reserves; and
(iii) other expenses associated with operation of the arrangement.
(c) The reserves described in Section 846.154(a) must have been established or be established before the final certificate of authority is issued.
(d) If, after examination and investigation, the commissioner is satisfied that the multiple employer welfare arrangement meets the requirements of this chapter, the commissioner shall issue a final certificate of authority to the arrangement.
(e) The commissioner shall maintain the information required under Subsection (b)(1)(C) and Subsection (b)(3) as confidential information. (V.T.I.C. Art. 3.95-2, Subsecs. (d) (part), (h), (i) (part).)
Sec. 846.057. DENIAL OF FINAL CERTIFICATE OF AUTHORITY. (a) The commissioner shall deny a final certificate of authority to an applicant that does not comply with this chapter.
(b) If the commissioner denies a final certificate of authority, the commissioner shall issue a written notice of refusal to the applicant. The notice of refusal must state the basis for the denial. The notice of refusal constitutes 30 days' advance notice of the revocation of the initial certificate of authority.
(c) If the applicant submits a written request for a hearing not later than the 30th day after the date of mailing of the notice of refusal, revocation of the initial certificate of authority is temporarily stayed, and the commissioner shall promptly conduct a hearing at which the applicant is given an opportunity to show compliance with this chapter. (V.T.I.C. Art. 3.95-2, Subsecs. (i) (part), (j).)
Sec. 846.058. DISQUALIFICATION. (a) A multiple employer welfare arrangement, each board member and officer of the arrangement, and any agent or other person associated with the arrangement shall be subject to disqualification for eligibility for a certificate of authority if the person:
(1) makes a material misstatement or omission in an application for a certificate of authority under this chapter;
(2) obtains or attempts to obtain at any time a certificate of authority or license for an insurance entity through intentional misrepresentation or fraud;
(3) misappropriates or converts to the person's own use or improperly withholds money under an employee welfare benefit plan or multiple employer welfare arrangement;
(4) is prohibited from serving in any capacity with the arrangement under Section 411, Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1111);
(5) without reasonable cause or excuse, fails to appear in response to a subpoena, examination, warrant, or any other order lawfully issued by the commissioner; or
(6) has previously been subject to a determination by the commissioner resulting in:
(A) suspension or revocation of a certificate of authority or license; or
(B) denial of a certificate of authority or license on grounds that would be sufficient for suspension or revocation.
(b) This section does not apply to a participating employer in its capacity as a participating employer and the employer's participating employees. (V.T.I.C. Art. 3.95-2, Subsec. (f).)
Sec. 846.059. FEES; SERVICE OF PROCESS. (a) Each multiple employer welfare arrangement shall pay to the commissioner in the amount set by the commissioner:
(1) an application fee for an initial certificate of authority;
(2) an application fee for a final certificate of authority; and
(3) a filing fee for submission of the arrangement's annual statement.
(b) The commissioner shall set the fees described by Subsection (a) in amounts reasonable and necessary to defray the costs of administering this chapter.
(c) Each multiple employer welfare arrangement shall appoint the commissioner as its resident agent for purposes of service of process. The fee for that service is $50, payable at the time of appointment.
(d) Fees paid under this section shall be deposited to the credit of the Texas Department of Insurance operating fund. (V.T.I.C. Art. 3.95-3.)
Sec. 846.060. SUSPENSION, REVOCATION, OR LIMITATION OF CERTIFICATE OF AUTHORITY. In addition to any requirement or remedy under a law cited under Section 846.003, the commissioner may suspend, revoke, or limit the certificate of authority of a multiple employer welfare arrangement if the commissioner determines, after notice and hearing, that the agreement does not comply with this chapter. (V.T.I.C. Art. 3.95-14, Subsec. (a).)
Sec. 846.061. ACTION BY ATTORNEY GENERAL. (a) The commissioner may notify the attorney general of a violation of this chapter, and the attorney general may apply to a district court in Travis County for leave to file suit in the nature of quo warranto or for injunctive relief or both.
(b) The attorney general may seek and the court may order:
(1) restitution for victims of an act declared to be unlawful under this chapter;
(2) assessment of a fine under this code; and
(3) recovery of reasonable attorney's fees. (V.T.I.C. Art. 3.95-14, Subsec. (b).)
[Sections 846.062-846.100 reserved for expansion]
SUBCHAPTER C. BOARD MEMBERS; OTHER OFFICERS AND PERSONNEL
Sec. 846.101. BOARD MEMBERS; NOTICE OF ELECTIONS. (a) Except as otherwise provided, the powers of a multiple employer welfare arrangement shall be exercised by a board elected to carry out the purposes established by the organizational documents of the arrangement.
(b) The member employers shall elect at least 75 percent of the board members. At least 75 percent of the board members must be individuals who are covered under the arrangement.
(c) An owner, officer, or employee of a third-party administrator who provides services to the multiple employer welfare arrangement or any other person who has received compensation from the arrangement may not serve as a board member.
(d) Each board member shall be elected for a term of at least two years.
(e) Each member employer of a multiple employer welfare arrangement shall be given notice of each election of board members and is entitled to an equal vote, either in person or by a written proxy signed by the member employer. An owner, officer, or employee of a third-party administrator who provides services to the arrangement or any other person who has received compensation from the arrangement may not serve as proxy. (V.T.I.C. Art. 3.95-7, Subsecs. (b), (c).)
Sec. 846.102. DUTIES OF BOARD MEMBERS. (a) The board members of a multiple employer welfare arrangement are responsible for all operations of the arrangement and shall take all necessary precautions to safeguard the assets of the arrangement.
(b) A board member shall give the attention and exercise the vigilance, diligence, care, and skill that a prudent person would use in like or similar circumstances. (V.T.I.C. Art. 3.95-10, Subsec. (a) (part).)
Sec. 846.103. LIMITATION ON ACTION AGAINST BOARD MEMBER. A board member may not be held liable in a private cause of action for any delinquency under Section 846.102 after the expiration of the earlier of:
(1) six years from the date of delinquency; or
(2) two years from the time when the delinquency is discovered by a person complaining of the delinquency. (V.T.I.C. Art. 3.95-10, Subsec. (a) (part).)
Sec. 846.104. COMPENSATION OF BOARD MEMBERS. A board member serves without compensation from the multiple employer welfare arrangement except for actual and necessary expenses. (V.T.I.C. Art. 3.95-10, Subsec. (c) (part).)
Sec. 846.105. OFFICERS; AGENTS. (a) The board shall select officers for the multiple employer welfare arrangement as designated in the organizational documents and may appoint agents as necessary for the arrangement to engage in business. Each officer and agent may exercise the authority and perform the duties required in the management of the property and affairs of the arrangement as delegated by the board.
(b) The board may remove an officer or agent if the board determines that the business interests of the multiple employer welfare arrangement are served by the removal.
(c) The board shall secure the fidelity of any or all of the officers or agents who handle the funds of the multiple employer welfare arrangement by bond or otherwise. (V.T.I.C. Art. 3.95-10, Subsec. (b).)
Sec. 846.106. COMPENSATION OF OFFICERS, AGENTS, AND EMPLOYEES. (a) A multiple employer welfare arrangement may pay the officers and agents of the arrangement suitable compensation. An officer, employee, or agent of an arrangement may not be compensated unreasonably.
(b) The compensation of any officer or employee of a multiple employer welfare arrangement may not be computed directly or indirectly as a percentage of money or premium collected.
(c) The compensation of an agent may not exceed five percent of the money or premium collected.
(d) A multiple employer welfare arrangement may pay compensation or make an emolument to an officer of the arrangement only if the compensation or emolument is first authorized by a majority vote of the board of the arrangement. (V.T.I.C. Art. 3.95-6 (part); Art. 3.95-10, Subsecs. (c) (part), (d).)
Sec. 846.107. RECEIPT OF THING OF VALUE; CRIMINAL PENALTY. (a) A board member, officer, or employee of a multiple employer welfare arrangement may not, knowingly and intentionally, directly or indirectly:
(1) receive money or another valuable thing for negotiating, procuring, recommending, or aiding in:
(A) a purchase by or sale to the arrangement of property; or
(B) a loan from the arrangement; or
(2) be pecuniarily interested as a principal, coprincipal, agent, or beneficiary in a purchase, sale, or loan described by Subdivision (1).
(b) A person commits an offense if the person violates this section. An offense under this subsection is a felony of the third degree. (V.T.I.C. Art. 3.95-11.)
[Sections 846.108-846.150 reserved for expansion]
SUBCHAPTER D. POWERS AND DUTIES OF MULTIPLE EMPLOYER
WELFARE ARRANGEMENTS
Sec. 846.151. GENERAL POWERS. (a) Unless otherwise provided by or inconsistent with this chapter, each multiple employer welfare arrangement may exercise the powers provided by this section.
(b) A multiple employer welfare arrangement may have succession, by its name, for the term stated in its trust agreement.
(c) A multiple employer welfare arrangement may sue and be sued. An arrangement may:
(1) complain and defend in any court;
(2) be a party to any proceedings before a public body of this state or of any other state or government; and
(3) sue a participating employer, an employee, or a beneficiary for any cause relating to the business of the arrangement.
(d) A multiple employer welfare arrangement may have a seal that may be used by having the seal or a facsimile of the seal impressed, affixed, or otherwise reproduced. The arrangement may alter the seal at will.
(e) A multiple employer welfare arrangement may appoint officers and agents as the business of the arrangement requires.
(f) A multiple employer welfare arrangement may adopt, amend, and repeal bylaws as necessary for the government of its affairs.
(g) A multiple employer welfare arrangement may conduct its business in this state, other states, and foreign countries and their territories and colonies.
(h) A multiple employer welfare arrangement may have offices outside this state.
(i) A multiple employer welfare arrangement may acquire, hold, mortgage, pledge, assign, and transfer real and personal property subject to this chapter. (V.T.I.C. Art. 3.95-6 (part).)
Sec. 846.152. FILING OF ORGANIZATIONAL DOCUMENTS. A multiple employer welfare arrangement shall file with the commissioner its organizational documents and all appurtenant amendments before those documents take effect. (V.T.I.C. Art. 3.95-7, Subsec. (a).)
Sec. 846.153. REQUIRED FILINGS. (a) A multiple employer welfare arrangement engaging in business in this state shall file the following with the commissioner on forms approved by the commissioner:
(1) a financial statement audited by a certified public accountant;
(2) an actuarial opinion prepared and certified by an actuary who is:
(A) not an employee of the arrangement; and
(B) a fellow of the Society of Actuaries, a member of the American Academy of Actuaries, or an enrolled actuary under the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.); and
(3) any modified terms of a plan document together with a certification from the trustees that the changes are in compliance with the minimum requirements of this chapter.
(b) A multiple employer welfare arrangement shall file the financial statement and the actuarial opinion required by Subsection (a) within 90 days of the end of the fiscal year.
(c) The actuarial opinion required under Subsection (a) must include:
(1) a description of the actuarial soundness of the multiple employer welfare arrangement, including any actions recommended to improve the actuarial soundness of the arrangement;
(2) the amount of cash reserves recommended to be maintained by the arrangement; and
(3) the level of specific and aggregate stop-loss insurance recommended to be maintained by the arrangement. (V.T.I.C. Art. 3.95-8, Subsec. (a) (part).)
Sec. 846.154. CASH RESERVE REQUIREMENTS. (a) The amount of cash reserves recommended under Section 846.153(c)(2) may not be less than the greater of:
(1) 20 percent of the total contributions in the preceding plan year; or
(2) 20 percent of the total estimated contributions for the current plan year.
(b) Cash reserves required by this section must be:
(1) computed with proper actuarial regard for:
(A) known claims, paid and outstanding;
(B) a history of incurred but not reported claims;
(C) claims handling expenses;
(D) unearned premium;
(E) an estimate for bad debts;
(F) a trend factor; and
(G) a margin for error; and
(2) maintained in cash or federally guaranteed obligations of less than five-year maturity that have a fixed or recoverable principal amount or in other investments as the commissioner may authorize by rule. (V.T.I.C. Art. 3.95-8, Subsecs. (a) (part), (b) (part).)
Sec. 846.155. ADJUSTMENT OF CONTRIBUTIONS. If the recommended cash reserves required by Section 846.154(a) exceed the greater of 40 percent of the total contributions for the preceding plan year or 40 percent of the total contributions expected for the current plan year, the contributions may be reduced to fund less than 100 percent of the aggregate retention plus all other costs of the multiple employer welfare arrangement, but not less than the level of contributions necessary to fund the minimum reserves required under Section 846.154(a). (V.T.I.C. Art. 3.95-2, Subsec. (d) (part).)
Sec. 846.156. WAIVER OR REDUCTION OF REQUIRED STOP-LOSS INSURANCE OR CASH RESERVES. On the application of a multiple employer welfare arrangement, the commissioner may waive or reduce the requirement for aggregate stop-loss insurance coverage and the amount of recommended cash reserves required by Section 846.154(a) on a determination that the interests of the participating employers and employees are adequately protected. (V.T.I.C. Art. 3.95-8, Subsec. (d).)
Sec. 846.157. RENEWAL OF CERTIFICATE; ADDITIONAL ACTUARIAL REVIEW. (a) The commissioner shall review the forms required by Section 846.153 and shall renew a multiple employer welfare arrangement's certificate of authority unless the commissioner determines that the arrangement does not comply with this chapter.
(b) On a finding of good cause, the commissioner may order an actuarial review of a multiple employer welfare arrangement in addition to the actuarial opinion required by Section 846.153(a). The arrangement shall pay the cost of the additional actuarial review.
(c) If the commissioner determines that a multiple employer welfare arrangement does not comply with this chapter, the commissioner may order the arrangement to correct the deficiencies. The commissioner may take any action against the multiple employer welfare arrangement authorized by this code if the arrangement does not initiate immediate corrective action. (V.T.I.C. Art. 3.95-8, Subsecs. (b) (part), (c), (e).)
Sec. 846.158. EXAMINATION OF MULTIPLE EMPLOYER WELFARE ARRANGEMENTS. (a) The commissioner or the commissioner's appointee may examine the affairs of any multiple employer welfare arrangement.
(b) For the purposes of this section the commissioner:
(1) shall have free access to all the books, records, and documents that relate to the business of the plan; and
(2) may examine under oath a board member, officer, agent, or employee of the multiple employer welfare arrangement in relation to the affairs, transactions, and conditions of the arrangement.
(c) Each multiple employer welfare arrangement shall pay the expenses of the examination as provided by Article 1.16. (V.T.I.C. Art. 3.95-9.)
Sec. 846.159. NAME OF MULTIPLE EMPLOYER WELFARE ARRANGEMENT. (a) A multiple employer welfare arrangement shall transact business under the arrangement's own name and may not adopt any assumed name. An arrangement may not use a name that is the same as or closely resembles the name of any other arrangement that:
(1) possesses a certificate of authority; and
(2) is engaged in business in this state.
(b) A multiple employer welfare arrangement may change its name by:
(1) amending the articles of the arrangement; or
(2) taking a new name with the approval of the commissioner. (V.T.I.C. Art. 3.95-5 (part).)
Sec. 846.160. EVIDENCE OF EXISTENCE. A certified copy of the multiple employer welfare arrangement's certificate of authority is prima facie evidence of the existence of the arrangement in a legal proceeding. (V.T.I.C. Art. 3.95-5 (part).)
[Sections 846.161-846.200 reserved for expansion]
SUBCHAPTER E. PROVISION OF COVERAGE
Sec. 846.201. BENEFITS ALLOWED. (a) A multiple employer welfare arrangement may only provide one or more of the following:
(1) medical, dental, vision, surgical, or hospital care;
(2) benefits in the event of sickness, accident, disability, or death;
(3) another benefit authorized to be provided by health insurers in this state; and
(4) prepaid legal services.
(b) Except as otherwise limited by the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.), a multiple employer welfare arrangement may only provide benefits to:
(1) active or retired owners, officers, directors, or employees of or partners in participating employers; and
(2) the beneficiaries of a person described by Subdivision (1). (V.T.I.C. Art. 3.95-4.)
Sec. 846.202. PREEXISTING CONDITION PROVISION. (a) In this section, "creditable coverage" has the meaning assigned by Section 3, Article 21.52G, as added by Chapter 955, Acts of the 75th Legislature, Regular Session, 1997.
(b) A preexisting condition provision in a multiple employer welfare arrangement's plan document may apply only to coverage for a disease or condition for which medical advice, diagnosis, care, or treatment was recommended or received during the six months before the earlier of:
(1) the effective date of coverage; or
(2) the first day of the waiting period.
(c) A preexisting condition provision in a multiple employer welfare arrangement's plan document may not apply to expenses incurred on or after the expiration of the 12 months following the initial effective date of coverage of the participating employee, dependent, or late-participating employee or dependent.
(d) A preexisting condition provision in a multiple employer welfare arrangement's plan document may not apply to an individual who was continuously covered for an aggregate period of 12 months under creditable coverage that was in effect until a date not more than 63 days before the effective date of coverage under the health benefit plan, excluding any waiting period.
(e) In determining whether a preexisting condition provision applies to an individual covered by a multiple employer welfare arrangement's plan document, the arrangement shall credit the time the individual was covered under previous creditable coverage if the previous coverage was in effect at any time during the 12 months preceding the effective date of coverage under the arrangement. If the previous coverage was issued under a health benefit plan, any waiting period that applied before that coverage became effective must also be credited against the preexisting condition provision period. (V.T.I.C. Art. 3.95-1, Subdiv. (3); Arts. 3.95-1.5, 3.95-4.8, Subsecs. (a), (b), (e), (f).)
Sec. 846.203. TREATMENT OF CERTAIN CONDITIONS AS PREEXISTING PROHIBITED. (a) A multiple employer welfare arrangement may not treat genetic information as a preexisting condition described by Section 846.202 in the absence of a diagnosis of the condition related to the information.
(b) A multiple employer welfare arrangement may not treat pregnancy as a preexisting condition described by Section 846.202. (V.T.I.C. Art. 3.95-4.8, Subsecs. (c), (d).)
Sec. 846.204. WAITING PERIOD PERMITTED. Sections 846.202 and 846.203 do not preclude application of a waiting period that applies to all new participating employees under the health benefit plan in accordance with the terms of the multiple employer welfare arrangement's plan document. (V.T.I.C. Art. 3.95-4.8, Subsec. (g).)
Sec. 846.205. CERTAIN LIMITATIONS OR EXCLUSIONS OF COVERAGE PROHIBITED. (a) A multiple employer welfare arrangement's plan document may not limit or exclude, by use of a rider or amendment applicable to a specific individual, coverage by type of illness, treatment, medical condition, or accident.
(b) This section does not preclude a multiple employer welfare arrangement from limiting or excluding coverage for a preexisting condition in accordance with Section 846.202. (V.T.I.C. Art. 3.95-4.1, Subsec. (m).)
Sec. 846.206. RENEWABILITY OF COVERAGE; CANCELLATION. (a) Except as provided by Section 846.207, a multiple employer welfare arrangement shall renew the health benefit plan, at the employer's option, unless:
(1) a contribution has not been paid as required by the terms of the plan;
(2) the employer has committed fraud or has intentionally misrepresented a material fact;
(3) the employer has not complied with the terms of the health benefit plan document;
(4) the health benefit plan is ceasing to offer any coverage in a geographic area; or
(5) there has been a failure to meet the terms of an applicable collective bargaining agreement or other agreement requiring or authorizing contributions to the health benefit plan, including a failure to renew the agreement or to employ employees covered by the agreement.
(b) A multiple employer welfare arrangement may refuse to renew the coverage of a participating employee or dependent for fraud or intentional misrepresentation of a material fact by that person.
(c) A multiple employer welfare arrangement may not cancel a health benefit plan except for a reason specified for refusal to renew under Subsection (a). An arrangement may not cancel the coverage of a participating employee or dependent except for a reason specified for refusal to renew under Subsection (b). (V.T.I.C. Art. 3.95-4.3.)
Sec. 846.207. REFUSAL TO RENEW. (a) A multiple employer welfare arrangement may elect to refuse to renew all health benefit plans delivered or issued for delivery by the arrangement in this state. The arrangement shall notify:
(1) the commissioner of the election not later than the 180th day before the date coverage under the first health benefit plan terminates under this subsection; and
(2) each affected employer not later than the 180th day before the date on which coverage terminates for that employer.
(b) A multiple employer welfare arrangement that elects under this section to refuse to renew all coverage may not write a health benefit plan in this state before the fifth anniversary of the date notice is delivered to the commissioner under Subsection (a).
(c) A multiple employer welfare arrangement may elect to discontinue a health benefit plan only if the arrangement:
(1) provides notice to each employer of the discontinuation before the 90th day preceding the date of the discontinuation of the plan;
(2) offers to each employer the option to purchase coverage under another health benefit plan offered by the arrangement; and
(3) acts uniformly without regard to the claims experience of the employer or any health status related factor of participating employees or dependents or new employees or dependents who may become eligible for the coverage. (V.T.I.C. Art. 3.95-4.4.)
Sec. 846.208. NOTICE TO COVERED PERSONS. (a) A multiple employer welfare arrangement that cancels or refuses to renew coverage under a health benefit plan under Section 846.206 or Section 846.207 shall notify the employer of the cancellation of or refusal to renew coverage not later than the 30th day before the date termination of coverage is effective. The employer is responsible for notifying participating employees of the cancellation of or refusal to renew coverage.
(b) The notice provided under this section is in addition to any other notice required by Section 846.206 or Section 846.207. (V.T.I.C. Art. 3.95-4.5.)
Sec. 846.209. WRITTEN STATEMENT OF DENIAL, CANCELLATION, OR REFUSAL TO RENEW. Denial by a multiple employer welfare arrangement of an application for coverage from an employer or cancellation of or refusal to renew must:
(1) be in writing; and
(2) state the reason or reasons for the denial, cancellation, or refusal to renew. (V.T.I.C. Art. 3.95-4.9.)
[Sections 846.210-846.250 reserved for expansion]
SUBCHAPTER F. PARTICIPATION IN COVERAGE
Sec. 846.251. PARTICIPATION CRITERIA. Participation criteria may not be based on health status related factors. (V.T.I.C. Art. 3.95-1, Subdiv. (10) (part); Art. 3.95-4.1, Subsec. (a) (part).)
Sec. 846.252. COVERAGE REQUIREMENTS. (a) A multiple employer welfare arrangement:
(1) may refuse to provide coverage to an employer in accordance with the arrangement's underwriting standards and criteria;
(2) shall accept or reject the entire group of individuals who meet the participation criteria and who choose coverage; and
(3) may exclude only those employees or dependents who have declined coverage.
(b) On issuance of coverage to an employer, each multiple employer welfare arrangement shall provide coverage to the employees who meet the participation criteria without regard to an individual's health status related factors. (V.T.I.C. Art. 3.95-4.1, Subsecs. (a) (part), (b) (part).)
Sec. 846.253. PROHIBITION ON EXCLUSION OF ELIGIBLE EMPLOYEE OR DEPENDENT. A multiple employer welfare arrangement may not exclude an employee who meets the participation criteria or an eligible dependent, including a late-participating employee or dependent, who would otherwise be covered. (V.T.I.C. Art. 3.95-4.1, Subsec. (l).)
Sec. 846.254. WRITTEN NOTICE TO EMPLOYEES COVERED. A multiple employer welfare arrangement, in connection with an employee welfare benefit plan, shall provide to each participating employee covered by the plan a written notice at the time the employee's coverage becomes effective that states that:
(1) individuals covered by the plan are only partially insured; and
(2) if the plan or the arrangement does not ultimately pay medical expenses that are eligible for payment under the plan for any reason, the participating employer or its participating employee covered by the plan may be liable for those expenses. (V.T.I.C. Art. 3.95-12.)
Sec. 846.255. DECLINING COVERAGE. (a) A multiple employer welfare arrangement shall obtain a written waiver from each employee who meets the participation criteria and declines coverage under a health plan offered to an employer. The waiver must ensure that the employee was not induced or pressured to decline coverage because of the employee's health status related factors.
(b) A multiple employer welfare arrangement may not provide coverage to an employer or the employees of an employer if the arrangement or an agent for the arrangement knows that the employer has induced or pressured an employee who meets the participation criteria or a dependent of the employee to decline coverage because of that individual's health status related factors. (V.T.I.C. Art. 3.95-4.1, Subsecs. (c), (d).)
Sec. 846.256. MINIMUM CONTRIBUTION OR PARTICIPATION REQUIREMENTS. (a) A multiple employer welfare arrangement may require an employer to meet minimum contribution or participation requirements as a condition of issuance and renewal of coverage in accordance with the terms of the arrangement's plan document.
(b) The minimum contribution and participation requirements must be stated in the plan document and must be applied uniformly to each employer offered or issued coverage by the multiple employer welfare arrangement in this state. (V.T.I.C. Art. 3.95-4.1, Subsec. (e).)
Sec. 846.257. ENROLLMENT; WAITING PERIOD. (a) The initial enrollment period for employees meeting the participation criteria must be at least 31 days, with a 31-day annual open enrollment period. The enrollment period must consist of an entire calendar month, beginning on the first day of the month and ending on the last day of the month. If the month is February, the period must last through March 2.
(b) A multiple employer welfare arrangement may establish a waiting period.
(c) A new employee who meets the participation criteria may not be denied coverage if the application for coverage is received by the multiple employer welfare arrangement not later than the 31st day after the later of:
(1) the date on which the employment begins; or
(2) the date on which the waiting period established under Subsection (b) expires.
(d) If dependent coverage is offered to participating employees under the terms of a multiple employer welfare arrangement's plan document:
(1) the initial enrollment period for the dependents must be at least 31 days, with a 31-day annual open enrollment period; and
(2) a dependent of a new employee meeting the participation criteria established by the arrangement may not be denied coverage if the application for coverage is received by the arrangement not later than the 31st day after the later of:
(A) the date on which the employment begins;
(B) the date on which the waiting period established under Subsection (b) expires; or
(C) the date on which the dependent becomes eligible for enrollment.
(e) A late-participating employee or dependent may be excluded from coverage until the next annual open enrollment period and may be subject to a one-year preexisting condition provision as described by Section 846.202. The period during which a preexisting condition provision applies may not exceed 18 months after the date of the initial application. (V.T.I.C. Art. 3.95-4.1, Subsecs. (f), (g), (h), (i), (j), (k).)
Sec. 846.258. COVERAGE FOR NEWBORN CHILDREN. (a) A multiple employer welfare arrangement's plan document may not limit or exclude initial coverage of a newborn child of a participating employee.
(b) Coverage of a newborn child of a participating employee under this section ends on the 32nd day after the date of the child's birth unless:
(1) dependent children are eligible for coverage under the multiple employer welfare arrangement's plan document; and
(2) not later than the 31st day after the date of birth, the arrangement receives:
(A) notice of the birth; and
(B) any required additional premium. (V.T.I.C. Art. 3.95-4.2, Subsec. (a).)
Sec. 846.259. COVERAGE FOR ADOPTED CHILDREN. (a) This section applies only if dependent children are eligible for coverage under the terms of a multiple employer welfare arrangement's plan document.
(b) A multiple employer welfare arrangement plan document may not limit or exclude initial coverage of an adopted child of a participating employee. A child is considered to be the child of a participating employee if the participating employee is a party to a suit in which the employee seeks to adopt the child.
(c) An adopted child of a participating employee may be enrolled, at the employee's option, not later than the 31st day after:
(1) the date the employee becomes a party to a suit in which the employee seeks to adopt the child; or
(2) the date the adoption becomes final.
(d) Coverage of an adopted child of a participating employee under this section ends unless the multiple employer welfare arrangement receives notice of the adoption and any required additional premiums not later than the 31st day after:
(1) the date the participating employee becomes a party to a suit in which the employee seeks to adopt the child; or
(2) the date the adoption becomes final. (V.T.I.C. Art. 3.95-4.2, Subsecs. (b), (c), (d).)
[Sections 846.260-846.300 reserved for expansion]
SUBCHAPTER G. MARKETING
Sec. 846.301. MARKETING REQUIREMENTS. On request, each employer purchasing a health benefit plan shall be given a summary of the plans for which the employer is eligible. (V.T.I.C. Art. 3.95-4.7, Subsec. (a).)
Sec. 846.302. ADDITIONAL REPORTING REQUIREMENTS. The department may require periodic reports by multiple employer welfare arrangements and agents regarding the health benefit plans issued by the arrangements. The reporting requirements must comply with federal law and regulations. (V.T.I.C. Art. 3.95-4.7, Subsec. (b).)
Sec. 846.303. APPLICABILITY TO THIRD-PARTY ADMINISTRATOR. If a multiple employer welfare arrangement enters into an agreement with a third-party administrator to provide administrative, marketing, or other services related to offering health benefit plans to employers in this state, the third-party administrator is subject to this chapter. (V.T.I.C. Art. 3.95-4.10.)
[Chapters 847-860 reserved for expansion]
SUBTITLE D. CASUALTY COMPANIES
CHAPTER 861. GENERAL CASUALTY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 861.001. DEFINITIONS
[Sections 861.002-861.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF GENERAL
CASUALTY COMPANY
Sec. 861.051. FORMATION OF COMPANY AUTHORIZED
Sec. 861.052. ARTICLES OF INCORPORATION; FILING AND
RECORDING REQUIREMENT
Sec. 861.053. PRELIMINARY OFFICERS AND DIRECTORS
Sec. 861.054. SUBSCRIPTION OF STOCK
Sec. 861.055. ORGANIZATIONAL MEETING
[Sections 861.056-861.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 861.101. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 861.102. ISSUANCE OF CERTIFICATE OF AUTHORITY
[Sections 861.103-861.150 reserved for expansion]
SUBCHAPTER D. POWERS AND DUTIES OF GENERAL CASUALTY COMPANY
Sec. 861.151. AUTHORITY OF BOARD OF DIRECTORS
Sec. 861.152. GENERAL POWERS OF COMPANY
Sec. 861.153. AUTHORIZED SHARES
Sec. 861.154. DIVIDENDS
Sec. 861.155. INTERFERENCE WITH CONDUCT OF BUSINESS
PROHIBITED; EXCEPTIONS
[Sections 861.156-861.200 reserved for expansion]
SUBCHAPTER E. INSURANCE COVERAGE PROVIDED BY GENERAL CASUALTY
COMPANIES
Sec. 861.201. KINDS OF INSURANCE AUTHORIZED
[Sections 861.202-861.250 reserved for expansion]
SUBCHAPTER F. REGULATION OF GENERAL CASUALTY COMPANY
Sec. 861.251. MINIMUM CAPITAL AND SURPLUS
Sec. 861.252. SECURITY DEPOSIT
Sec. 861.253. INTEREST ON SECURITY DEPOSITS
Sec. 861.254. ANNUAL STATEMENT; FILING FEE
Sec. 861.255. RULES REGARDING CERTAIN ASSETS
Sec. 861.256. FAILURE TO MAKE DEPOSIT OR DELIVER ANNUAL
STATEMENT
Sec. 861.257. EXAMINATION OF COMPANY
Sec. 861.258. REAL PROPERTY
[Sections 861.259-861.700 reserved for expansion]
SUBCHAPTER O. DISCIPLINARY PROCEDURES AND PENALTY
Sec. 861.701. REVOCATION OF CERTIFICATE
Sec. 861.702. PENALTY
Sec. 861.703. COLLECTION OF PENALTY
CHAPTER 861. GENERAL CASUALTY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 861.001. DEFINITIONS. In this chapter:
(1) "General casualty company" means an accident or casualty insurance company organized or engaging in the business of insurance under this chapter.
(2) "Incorporators" means those persons who associate by written articles of incorporation to organize a general casualty company. (V.T.I.C. Arts. 8.02 (part), 8.05 (part), 8.06 (part); New.)
[Sections 861.002-861.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF GENERAL CASUALTY COMPANY
Sec. 861.051. FORMATION OF COMPANY AUTHORIZED. Three or more persons, a majority of whom are residents of this state, may form a general casualty company in accordance with this chapter to write insurance described by Subchapter E. (V.T.I.C. Art. 8.01 (part).)
Sec. 861.052. ARTICLES OF INCORPORATION; FILING AND RECORDING REQUIREMENT. (a) The articles of incorporation for a general casualty company must specify:
(1) the general purpose of the company; and
(2) the proposed duration of the company.
(b) The incorporators shall file with the department:
(1) articles of incorporation for the general casualty company;
(2) a charter fee in the amount determined under Article 4.07; and
(3) an affidavit, made by two or more of the incorporators, that all of the general casualty company's stock is subscribed in good faith and fully paid for.
(c) On receipt of a filing under Subsection (b), the department shall record the articles of incorporation in records maintained for that purpose.
(d) On receipt of a fee in the amount determined under Article 4.07, the department shall provide the incorporators with a certified copy of the articles of incorporation.
(e) On receipt of a certified copy of the articles of incorporation, the general casualty company is a body politic and corporate, and the incorporators may complete organization of the company in accordance with Section 861.055. (V.T.I.C. Arts. 8.02 (part), 8.03 (part).)
Sec. 861.053. PRELIMINARY OFFICERS AND DIRECTORS. The incorporators shall choose from among themselves a president, a secretary, a treasurer, and at least three directors who continue in office until:
(1) the first anniversary of the date the articles of incorporation are filed; and
(2) their successors are chosen and qualify. (V.T.I.C. Art. 8.04 (part).)
Sec. 861.054. SUBSCRIPTION OF STOCK. The incorporators shall:
(1) open books for the subscription of stock in the general casualty company at the times and places the incorporators consider convenient and proper; and
(2) keep the books open until the full amount specified in the articles of incorporation is subscribed. (V.T.I.C. Art. 8.04 (part).)
Sec. 861.055. ORGANIZATIONAL MEETING. (a) After receiving a certified copy of the articles of incorporation under Section 861.052, a general casualty company shall promptly call a meeting of the company's shareholders.
(b) At the meeting the shareholders shall:
(1) adopt bylaws to govern the company; and
(2) elect a board of directors composed of shareholders of the company. (V.T.I.C. Art. 8.03 (part).)
[Sections 861.056-861.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 861.101. CERTIFICATE OF AUTHORITY REQUIRED. A general casualty company may not engage in the business of insurance in this state without a certificate of authority issued under this chapter. (V.T.I.C. Art. 8.16 (part).)
Sec. 861.102. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The department shall issue a certificate of authority to a general casualty company authorizing the company to engage in the business of insurance under this chapter if:
(1) the company meets the requirements of this chapter; and
(2) the commissioner has granted a charter to the company in the manner provided by Sections 822.051, 822.052, 822.053, 822.054, 822.057, 822.058, 822.059, 822.060, and 822.210.
(b) A certificate of authority is evidence of a general casualty company's authorization to engage in the business of insurance under this chapter and of the company's solvency and credits. (V.T.I.C. Arts. 8.05 (part), 8.20.)
[Sections 861.103-861.150 reserved for expansion]
SUBCHAPTER D. POWERS AND DUTIES OF
GENERAL CASUALTY COMPANY
Sec. 861.151. AUTHORITY OF BOARD OF DIRECTORS. Subject to the bylaws of the company as adopted or amended by the shareholders or directors, the board of directors of a general casualty company has full control and management of the company. (V.T.I.C. Art. 8.03 (part).)
Sec. 861.152. GENERAL POWERS OF COMPANY. A general casualty company may:
(1) sue or be sued in the name of the company;
(2) make or enforce contracts in relation to the business of the company;
(3) have and use a common seal;
(4) in its own name, or through a trustee chosen by the board of directors, acquire, purchase, hold, and dispose of real and personal property to further the purposes of the company; and
(5) through its board of directors, trustees, or managers, adopt and amend bylaws that include provisions establishing the qualifications, duties, and terms of office of and the manner of electing directors, trustees, or managers and officers of the company. (V.T.I.C. Art. 8.06.)
Sec. 861.153. AUTHORIZED SHARES. (a) A general casualty company may increase or decrease its capital stock after:
(1) the intent to increase the stock is ratified by a two-thirds vote of the shareholders or the intent to decrease the stock is ratified by a majority vote of the shareholders; and
(2) notice of the intent to increase or decrease the stock is published in a newspaper of general circulation for five consecutive days.
(b) An increase in capital stock must be equal to an amount of at least $50,000. (V.T.I.C. Arts. 8.13; 8.23.)
Sec. 861.154. DIVIDENDS. Except as authorized by Article 21.31, the directors of a general casualty company may not issue dividends. (V.T.I.C. Art. 8.14.)
Sec. 861.155. INTERFERENCE WITH CONDUCT OF BUSINESS PROHIBITED; EXCEPTIONS. A person, including the department and the commissioner, may not restrain or interfere with the conduct of business of a general casualty company, except in:
(1) a revocation of the company's certificate of authority and appointment of a receiver under Section 861.701;
(2) an action by a judgment creditor; or
(3) a proceeding supplementary to execution. (V.T.I.C. Art. 8.11 (part).)
[Sections 861.156-861.200 reserved for expansion]
SUBCHAPTER E. INSURANCE COVERAGE PROVIDED BY
GENERAL CASUALTY COMPANIES
Sec. 861.201. KINDS OF INSURANCE AUTHORIZED. (a) A general casualty company may:
(1) insure a person against:
(A) bodily injury, disability, or death that results from an accident; or
(B) disability that results from disease;
(2) insure against loss or damage that results from an accident or injury sustained by an employee or other person, for which accident or injury the insured is liable;
(3) insure against loss or damage that results from an accident to or injury sustained by a person, for which loss the insured is liable, other than employers liability insurance under Subdivision (2);
(4) insure against loss or damage by burglary, theft, or housebreaking;
(5) insure glass against breakage;
(6) insure a steam boiler, elevator, electrical device, or engine and any machinery or appliance used or operated in connection with a steam boiler, elevator, electrical device, or engine;
(7) insure against loss or damage from injury to a person or property that results accidentally from an item described by Subdivision (6);
(8) insure against loss or damage by water to goods or premises that arises from the breakage or leakage of a sprinkler or water pipe;
(9) insure against loss that:
(A) results from accidental damage to an automobile; or
(B) is caused accidentally by an automobile;
(10) insure a person, association, or corporation against loss or damage that results from giving or extending credit;
(11) insure against loss that results from the nonpayment of the principal of or interest on a bond, mortgage, or other evidence of indebtedness;
(12) write marine insurance, which may include insurance against the hazards and perils incident to war; or
(13) insure against any other casualty or insurance risk, other than fire or life insurance, specified in the company's articles of incorporation that:
(A) may be lawfully made the subject of insurance; and
(B) is not otherwise provided for by this chapter.
(b) A general casualty company may engage in one or more of the activities specified by Subsection (a). (V.T.I.C. Arts. 8.01 (part); 8.05 (part).)
[Sections 861.202-861.250 reserved for expansion]
SUBCHAPTER F. REGULATION OF GENERAL CASUALTY COMPANY
Sec. 861.251. MINIMUM CAPITAL AND SURPLUS. (a) A general casualty company must have at least the minimum capital and surplus applicable to casualty, fidelity, guaranty, surety, and trust companies under Sections 822.054, 822.210, and 822.211. At the time of incorporation, the required capital and surplus must be in cash.
(b) After incorporation and issuance of a certificate of authority, a general casualty company shall invest the minimum capital and surplus as provided by Section 822.204. The company shall invest all other funds of the company in excess of the minimum capital and surplus as provided by Article 2.10 and Section 862.002.
(c) A general casualty company may not loan any part of the company's paid in capital or surplus to an officer of the company. (V.T.I.C. Art. 8.05 (part).)
Sec. 861.252. SECURITY DEPOSIT. (a) On granting of the charter to a general casualty company, the company shall deposit with the comptroller $50,000 in:
(1) cash; or
(2) securities of the kind described by Article 2.10.
(b) If, as a prerequisite to engaging in the business of insurance in another state, country, or province, a general casualty company is required to deposit with the appropriate officer of that state, country, or province, or with the comptroller, securities or cash in excess of the deposit made under Subsection (a), the company may deposit with the comptroller any authorized securities or cash sufficient to meet the requirement. The comptroller shall receive and hold the deposit exclusively for the protection of policyholders of the company.
(c) A general casualty company may withdraw a deposit made under Subsection (b) if the company files with the department satisfactory evidence, as determined by the commissioner, that the company:
(1) has withdrawn from business in the other state, country, or province; and
(2) has no unsecured liabilities outstanding in the other state, country, or province.
(d) A general casualty company may change the company's securities on deposit with the comptroller by withdrawing those securities and substituting an equal amount of other securities authorized by Subsection (a). (V.T.I.C. Arts. 8.05 (part), 8.12.)
Sec. 861.253. INTEREST ON SECURITY DEPOSITS. (a) A general casualty company with securities on deposit under this chapter is entitled to collect the interest on the deposits as the interest becomes due. The comptroller shall deliver to the company the coupons or other evidence of interest pertaining to the deposits.
(b) The comptroller shall collect a general casualty company's interest described by Subsection (a) as the interest becomes due and hold that interest as additional security if:
(1) the company fails to deposit additional security as required by the commissioner; or
(2) proceedings are pending to wind up or enjoin the company. (V.T.I.C. Art. 8.15.)
Sec. 861.254. ANNUAL STATEMENT; FILING FEE. (a) The president, vice president, and secretary of a general casualty company, or a majority of the directors or trustees of the company, shall, not later than the 60th day after January 1 of each year, deliver to the department a verified statement of the condition of the company as of December 31 of the preceding year.
(b) The statement must include:
(1) the name and location of the company;
(2) the names of the company's officers;
(3) the amount of the company's capital stock;
(4) the amount of the company's capital stock paid in;
(5) the assets of the company;
(6) the liabilities of the company;
(7) the income of the company during the year;
(8) the expenditures of the company during the year;
(9) the amount paid by the company in fees during the year;
(10) the amount paid by the company for losses during the year; and
(11) the total amount of insurance issued by the company and in force.
(c) A general casualty company's assets under Subsection (b)(5) consist of:
(1) the value of real property owned by the company;
(2) the amount of cash on hand;
(3) the amount of cash deposited with a bank or trust company;
(4) the names, amounts, and par and market values of United States bonds and all other bonds;
(5) the amount of loans secured by first mortgage on real estate;
(6) the amount of all other bonds and loans and how secured, with rate of interest;
(7) the amount of notes given for unpaid stock and how secured;
(8) the amount of interest due and unpaid;
(9) if the total value of the equipment exceeds $2,000, the value of all electronic machines that comprise a data processing system and of all other office equipment, furniture, machines, and labor-saving devices purchased for and used in connection with the business of an insurance company to the extent that the total actual cash market value of those assets is less than five percent of the other admitted assets of the company; and
(10) all other credits or assets.
(d) A general casualty company's liabilities under Subsection (b)(6) consist of:
(1) the amount of losses due and unpaid;
(2) the amount of claims for losses unadjusted; and
(3) the amount of claims for losses resisted.
(e) A general casualty company's income under Subsection (b)(7) consists of:
(1) the amount of fees received;
(2) the amount of interest received from all sources; and
(3) the amount of receipts from all other sources.
(f) A general casualty company's expenditures under Subsection (b)(8) consist of:
(1) the amount paid for losses;
(2) the amount of dividends paid to shareholders;
(3) the amount of commissions and salaries paid to agents;
(4) the amount paid to officers for salaries;
(5) the amount paid for taxes; and
(6) the amount of all other payments or expenditures.
(g) The commissioner may amend the form of the annual statement and require additional information as considered necessary to determine the standing of a general casualty company.
(h) Except as provided by Article 4.07, the department shall charge a fee of $20 for filing the annual statement required by this section. The comptroller shall collect the fee. (V.T.I.C. Arts. 8.07 (part), 8.08, 8.21.)
Sec. 861.255. RULES REGARDING CERTAIN ASSETS. (a) The value of the electronic machines and systems, office equipment, furniture, other machines, and labor-saving devices specified in Section 861.254(c)(9), as determined under this section and in accordance with rules adopted by the commissioner, is an admitted asset of the company.
(b) The commissioner may adopt rules defining electronic machines and systems, office equipment, furniture, other machines, and labor-saving devices as specified in Section 861.254(c)(9) and stating the maximum period for which each class of equipment may be amortized. (V.T.I.C. Art. 8.07 (part).)
Sec. 861.256. FAILURE TO MAKE DEPOSIT OR DELIVER ANNUAL STATEMENT. (a) If a general casualty company fails to make a deposit under Section 861.252 or to deliver an annual statement under Section 861.254 in a timely manner, the department shall notify the company that the company may not issue new insurance until the deposit is made or the statement is delivered to the department.
(b) A general casualty company may not issue an insurance policy in violation of this section. (V.T.I.C. Art. 8.09.)
Sec. 861.257. EXAMINATION OF COMPANY. A general casualty company is subject to Articles 1.15 and 1.16. (V.T.I.C. Art. 8.10.)
Sec. 861.258. REAL PROPERTY. (a) A general casualty company is subject to Section 862.002 and may not purchase, hold, or convey real property except as authorized by that section.
(b) A general casualty company shall sell real property acquired in compliance with Subsection (a) not later than the 10th anniversary of the date the real property was acquired.
(c) A general casualty company may retain real property after the date specified by Subsection (b) if the commissioner issues a certificate stating:
(1) that sale of the real property in compliance with Subsection (b) would cause the company to incur a material loss; and
(2) a later date by which the real property must be sold.
(d) Subsection (b) does not apply to:
(1) real property occupied by buildings used in whole or in part by a general casualty company in the transaction of business;
(2) an interest in minerals or royalty reserved on the sale of real property acquired under Sections 862.002(c)(1)-(3); and
(3) investment real property acquired under Article 2.10(e)(11). (V.T.I.C. Arts. 8.18, 8.19.)
[Sections 861.259-861.700 reserved for expansion]
SUBCHAPTER O. DISCIPLINARY PROCEDURES AND PENALTY
Sec. 861.701. REVOCATION OF CERTIFICATE. (a) If, as a result of an examination under Section 861.257, the commissioner determines that a general casualty company has not complied with this chapter, the commissioner shall:
(1) revoke the company's certificate of authority; and
(2) notify the attorney general of the revocation.
(b) On receipt of notification under Subsection (a)(2), the attorney general shall request court appointment of a receiver for the general casualty company. Under the direction of the court, the receiver shall wind up the affairs of the company. (V.T.I.C. Art. 8.11 (part).)
Sec. 861.702. PENALTY. A general casualty company that violates Section 861.101 is subject to a penalty of $100 for each day the company writes new business in this state without the certificate of authority required by that section. (V.T.I.C. Art. 8.16 (part).)
Sec. 861.703. COLLECTION OF PENALTY. (a) The attorney general or a district or county attorney under the direction of the attorney general may file an action in the name of the state to collect a penalty under this chapter.
(b) An action filed under this section must be filed in Travis County or in the county in which the general casualty company's principal office is located. (V.T.I.C. Art. 8.17 (part).)
CHAPTER 862. FIRE AND MARINE INSURANCE COMPANIES
SUBCHAPTER A. REGULATION OF FIRE AND
MARINE INSURANCE COMPANIES
Sec. 862.001. ANNUAL STATEMENT
Sec. 862.002. PROHIBITIONS RELATING TO HOLDING REAL PROPERTY;
EXCEPTIONS
Sec. 862.003. ADMITTED ASSETS
[Sections 862.004-862.050 reserved for expansion]
SUBCHAPTER B. INSURANCE COVERAGE PROVIDED BY FIRE
AND MARINE INSURANCE COMPANIES
Sec. 862.051. KINDS OF INSURANCE AUTHORIZED
Sec. 862.052. PROHIBITIONS RELATING TO LIFE INSURANCE AND
LIFE INSURANCE COMPANIES
Sec. 862.053. FIRE INSURANCE: TOTAL LOSS OF REAL PROPERTY
Sec. 862.054. FIRE INSURANCE: BREACH BY INSURED; PERSONAL
PROPERTY COVERAGE
Sec. 862.055. FIRE INSURANCE: INTEREST OF MORTGAGEE OR
TRUSTEE
[Sections 862.056-862.100 reserved for expansion]
SUBCHAPTER C. REINSURANCE AND RESERVES
Sec. 862.101. FIRE AND ALLIED LINES OF INSURANCE: AUTHORIZED AND
REQUIRED REINSURANCE
Sec. 862.102. REINSURANCE OR RESERVES REQUIRED FOR FIRE
INSURANCE
Sec. 862.103. REINSURANCE OR RESERVES REQUIRED FOR HOME
WARRANTY INSURANCE COMPANIES
Sec. 862.104. RESERVES REQUIRED FOR OCEAN AND INLAND MARINE TRIP
INSURANCE COMPANIES
[Sections 862.105-862.150 reserved for expansion]
SUBCHAPTER D. IMPAIRMENT OF SURPLUS
Sec. 862.151. REDUCTION OF CAPITAL STOCK AND PAR VALUE OF
SHARES
Sec. 862.152. MAKING GOOD ON IMPAIRMENT
Sec. 862.153. FAILURE OF SHAREHOLDER TO PAY
Sec. 862.154. CREATION AND DISPOSAL OF NEW STOCK
CHAPTER 862. FIRE AND MARINE INSURANCE COMPANIES
SUBCHAPTER A. REGULATION OF FIRE AND
MARINE INSURANCE COMPANIES
Sec. 862.001. ANNUAL STATEMENT. (a) Each year the president or vice president and the secretary of a fire, marine, or inland insurance company shall:
(1) prepare under oath a complete and accurate statement of the condition of the company as of December 31 of the preceding year; and
(2) file the statement with the department before the 62nd day of the year in which it is prepared.
(b) The annual statement must show:
(1) the name and location of the company;
(2) the names and residences of the company's officers;
(3) the amount of the capital stock of the company;
(4) the amount of capital stock paid up;
(5) the property and assets held by the company, specifying:
(A) the location, description, and value, as near as may be, of real property owned by the company and, if the company is organized under the laws of this state, the annual statement must include an abstract of the title to that real property;
(B) the amount of cash on hand and on deposit in banks to the credit of the company and the names of those banks;
(C) the amount of cash held by agents of the company and the names of those agents;
(D) the amount of cash in the course of transmission;
(E) the amount of loans secured by a first mortgage on real property, the rate of interest on each loan, the location and value of each property, and the name of each mortgagor;
(F) the amount of all other bonds and loans, the rate of interest on each bond or loan, and a description of the security given for each bond or loan;
(G) the amount due the company from judgments that have been obtained and a description of each judgment;
(H) the amount of all stock owned by the company, including a description of the stock, the amount and number of shares, and the par and market values of each kind of stock;
(I) the amount of stock held by the company as collateral security for loans, including the amount loaned on the stock and the par and market values of the stock;
(J) the amount of interest due and unpaid to the company;
(K) a description and value of all other securities; and
(L) if the total value of the equipment exceeds $2,000, the value of all electronic machines that comprise a data processing system or systems and of all other office equipment, furniture, machines, and labor-saving devices purchased for and used in connection with the business of the insurance company to the extent that the total actual cash market value of those assets is less than five percent of the other admitted assets shown on the statement;
(6) the liabilities of the company, specifying:
(A) losses adjusted and due;
(B) losses adjusted and not due;
(C) losses unadjusted;
(D) losses in suspense and the cause for suspension;
(E) losses resisted and in litigation;
(F) dividends, in scrip or cash, specifying the amount of each declared but not due;
(G) dividends declared and due;
(H) the amount required by law as reserve on all unexpired risks, computed as required by this code;
(I) the amount due banks or other creditors, the name of each bank or creditor, and the amount due each bank or creditor;
(J) the amount of money borrowed by the company, the name of each lender, a description of the security given for each loan, and the rate of any interest; and
(K) all other claims against the company and a description of each claim;
(7) the income of the company during the preceding year, specifying:
(A) separately the amount received, after deducting reinsurance, as:
(i) fire premiums; and
(ii) marine inland transportation premiums;
(B) the amount received as interest; and
(C) the amount received from all other sources;
(8) the expenditures of the company during the preceding year, specifying:
(A) the amount of losses paid, showing losses that accrued before and that accrued after the date of the preceding statement, and the amount at which losses were estimated in that statement;
(B) the amount paid as dividends;
(C) the amount paid for return premiums, commissions, salaries, expenses, and other charges of officers, agents, and employees;
(D) the amount paid for federal, state, and local taxes and duties; and
(E) the amount paid for all other expenses;
(9) the largest amount insured by the company in a single risk, naming that risk;
(10) the amount of risks written during the preceding year;
(11) the amount of risks in force that have less than one year to run;
(12) the amount of risks in force that have more than one year but less than three years to run;
(13) the amount of risks that have more than three years to run; and
(14) a statement of whether dividends are declared on premiums received for risks not terminated.
(c) The commissioner may adopt rules defining electronic machines and systems, office equipment, furniture, machines, and labor-saving devices as specified in Subsection (b)(5)(L) and stating the maximum period for which each class of equipment may be amortized. (V.T.I.C. Arts. 6.11, 6.12 (part).)
Sec. 862.002. PROHIBITIONS RELATING TO HOLDING REAL PROPERTY; EXCEPTIONS. (a) A fire, marine, or inland insurance company may not purchase, hold, or convey real property, except as provided by Subsections (b) and (c).
(b) The company may erect and maintain buildings ample and adequate for the transaction of the company's business.
(c) Subsection (a) does not apply to:
(1) real property mortgaged to the company in good faith as security for a loan previously contracted or for money due;
(2) real property conveyed to the company in satisfaction of a debt previously contracted in the legitimate business of the company or for money due;
(3) real property purchased under a judgment, decree, or mortgage obtained or made for a debt under Subdivision (2); or
(4) a mineral or royalty interest reserved on the sale of real property acquired under Subdivision (1), (2), or (3) before January 1, 1942.
(d) A fire, marine, or inland insurance company may not invest more than 33-1/3 percent of the company's admitted assets in real property. A fire, marine, or inland insurance company may not invest any of its capital or minimum surplus in real property, other than real property described by Subsection (c).
(e) Section 861.258 applies to real property acquired under Subsection (c)(1), (2), or (3).
(f) The commissioner shall appoint at least two competent and disinterested residents of this state to appraise real property described by Subsection (b) when the property is acquired or when the company applies for amendment to its charter. The company shall pay to the commissioner the reasonable cost of the appraisal. (V.T.I.C. Art. 6.08.)
Sec. 862.003. ADMITTED ASSETS. The value of the property of the company shown on the report as determined under Section 862.001 and the rules adopted by the commissioner adopted under that section is considered to be an admitted asset of the company for all purposes. (V.T.I.C. Art. 6.12 (part).)
[Sections 862.004-862.050 reserved for expansion]
SUBCHAPTER B. INSURANCE COVERAGE PROVIDED BY FIRE
AND MARINE INSURANCE COMPANIES
Sec. 862.051. KINDS OF INSURANCE AUTHORIZED. On filing notice of its intent with the department, an insurance company engaged in the business of insurance in this state under an appropriate certificate of authority may:
(1) insure houses, buildings, and other property against loss or damage by fire;
(2) insure goods, merchandise, and other property in the course of transportation by land or water, or vessels afloat, regardless of their location;
(3) insure motor vehicles, whether stationary or being operated under the motor vehicle's own power, against loss or damage by fire, lightning, windstorm, hail storm, tornado, cyclone, explosion, transportation by land or water, theft, and collision;
(4) lend money on bottomry or respondentia;
(5) obtain insurance against:
(A) any loss or risk the company has incurred in the course of its business; and
(B) any loss or risk on an interest that the company has in property because of a loan it has made on bottomry or respondentia; and
(6) take any action proper to promote an activity described by this section. (V.T.I.C. Art. 6.03 (part).)
Sec. 862.052. PROHIBITIONS RELATING TO LIFE INSURANCE AND LIFE INSURANCE COMPANIES. (a) An insurance company authorized by its charter to write fire, marine, lightning, tornado, or inland insurance in this state may not write life insurance.
(b) An insurance company authorized to write life insurance in this state may not write fire, marine, or inland insurance or any other insurance described by Section 862.051.
(c) The commissioner shall enforce this section. (V.T.I.C. Art. 1.10, Sec. 15; Art. 6.03 (part).)
Sec. 862.053. FIRE INSURANCE: TOTAL LOSS OF REAL PROPERTY. (a) A fire insurance policy, in case of a total loss by fire of property insured, shall be held and considered to be a liquidated demand against the company for the full amount of the policy. This subsection does not apply to personal property.
(b) An insurance company shall incorporate verbatim the provisions of Subsection (a) in each fire insurance policy issued as coverage on real property in this state.
(c) The commissioner shall require compliance with this section. (V.T.I.C. Art. 6.13.)
Sec. 862.054. FIRE INSURANCE: BREACH BY INSURED; PERSONAL PROPERTY COVERAGE. Unless the breach or violation contributed to cause the destruction of the property, a breach or violation by the insured of a warranty, condition, or provision of a fire insurance policy or contract of insurance on personal property, or of an application for the policy or contract:
(1) does not render the policy or contract void; and
(2) is not a defense to a suit for loss. (V.T.I.C. Art. 6.14.)
Sec. 862.055. FIRE INSURANCE: INTEREST OF MORTGAGEE OR TRUSTEE. (a) The interest of a mortgagee or trustee under a fire insurance contract covering property located in this state may not be invalidated by:
(1) an act or neglect of the mortgagor or owner of the property; or
(2) the occurrence of a condition beyond the mortgagor's or owner's control.
(b) A provision of a contract that conflicts with Subsection (a) is void. (V.T.I.C. Art. 6.15.)
[Sections 862.056-862.100 reserved for expansion]
SUBCHAPTER C. REINSURANCE AND RESERVES
Sec. 862.101. FIRE AND ALLIED LINES OF INSURANCE: AUTHORIZED AND REQUIRED REINSURANCE. (a) In this section, "fire and allied lines of insurance" has the meaning assigned by statute, rules adopted by the commissioner, or lawful custom.
(b) An insurance or reinsurance company that is authorized to write or reinsure fire and allied lines of insurance in this state may reinsure all or any part of a single risk in one or more other solvent insurers.
(c) An insurance company that is incorporated under the laws of the United States or a state of the United States and authorized to write fire and allied lines of insurance in this state may not, unless the excess is reinsured by the company in another solvent insurer, expose itself to any loss or hazard on a single risk in an amount that exceeds 10 percent of the company's paid-up capital stock and surplus.
(d) An insurance company that is incorporated under the laws of a jurisdiction other than the United States or a state of the United States and authorized to write fire and allied lines of insurance in this state may not, unless the excess is reinsured by the company in another solvent insurer, expose itself to any loss or hazard on a single risk in an amount that exceeds the sum of:
(1) 10 percent of the company's deposit with the statutory officer in the state through which the company is authorized to do business in the United States; and
(2) 10 percent of the other policyholders' surplus of the company's United States branch.
(e) Subsections (c) and (d) do not apply in connection with the writing of insurance for cotton in bales or for grain.
(f) Reinsurance that is required or permitted by this section must comply with Articles 5.75-1 and 21.72. (V.T.I.C. Art. 6.16.)
Sec. 862.102. REINSURANCE OR RESERVES REQUIRED FOR FIRE INSURANCE. (a) An insurance company writing fire insurance in this state shall maintain reinsurance or unearned premium reserves on its policies in force.
(b) The commissioner may require that reserves required by Subsection (a) equal the unearned portions of the gross premiums in force after deducting reinsurance under Section 862.101, as computed on each respective risk from the policy's date of issue.
(c) If the commissioner does not impose a requirement under Subsection (b), the portions of the gross premium in force held as reinsurance or unearned premium reserves after deducting reinsurance under Section 862.101 shall be computed as follows:
Term for Which Policy Was Written
Reserve for Unearned Premium
1 year or less
1/2
2 years
1st year 3/4
2nd year 1/4
3 years
1st year 5/6
2nd year 1/2
3rd year 1/6
4 years
1st year 7/8
2nd year 5/8
3rd year 3/8
4th year 1/8
5 years
1st year 9/10
2nd year 7/10
3rd year 1/2
4th year 3/10
5th year 1/10
More than 5 years
pro rata
(d) Notwithstanding Subsection (c), an insurance company may compute, or the commissioner may require an insurance company to compute, the reserves on a quarterly, monthly, or more frequent pro rata basis.
(e) An insurance company that adopts a method for computing the reserve may not adopt another method without commissioner approval. (V.T.I.C. Art. 6.01.)
Sec. 862.103. REINSURANCE OR RESERVES REQUIRED FOR HOME WARRANTY INSURANCE COMPANIES. (a) An insurance company writing home warranty insurance in this state shall maintain reinsurance or unearned premium reserves on its policies in force.
(b) Reserves required by Subsection (a) shall be computed in the same manner and to the same extent as is fire insurance under Section 862.102. (V.T.I.C. Art. 6.01-A.)
Sec. 862.104. RESERVES REQUIRED FOR OCEAN AND INLAND MARINE TRIP INSURANCE COMPANIES. The total of the premiums on ocean and inland marine trip insurance risks not terminated is considered to be unearned, and the insurance company shall maintain a reserve equal to the total of the premiums for those policies. (V.T.I.C. Art. 6.02.)
[Sections 862.105-862.150 reserved for expansion]
SUBCHAPTER D. IMPAIRMENT OF SURPLUS
Sec. 862.151. REDUCTION OF CAPITAL STOCK AND PAR VALUE OF SHARES. (a) If the minimum surplus of a fire, marine, or inland insurance company is impaired in excess of the amount permitted under Section 5, Article 1.10, the commissioner may allow the company to amend its charter as provided by Sections 822.157 and 822.158 to reduce the amount of the company's capital stock and the par value of its shares in proportion to the extent of the permitted amount of impairment.
(b) A company acting under Subsection (a):
(1) may not reduce the par value of its shares below the sum computed under Section 822.055;
(2) may not deduct from the assets and property on hand more than $125,000;
(3) shall retain the remainder of the assets and property on hand as surplus assets;
(4) may not distribute any of the assets or property to the shareholders; and
(5) may not reduce the capital stock or surplus of the company to an amount less than the minimum capital and the minimum surplus required by Sections 822.202, 822.210, and 822.211, subject to Section 5, Article 1.10. (V.T.I.C. Art. 6.04.)
Sec. 862.152. MAKING GOOD ON IMPAIRMENT. (a) This section applies to a fire, marine, or inland insurance company that receives notice from the commissioner under Section 5, Article 1.10, to make good within 60 days:
(1) any impairment of the company's required capital; or
(2) the company's surplus.
(b) The company shall promptly call on its shareholders for an amount necessary to make the company's capital and surplus equal to the amount required by Sections 822.054 and 822.210, subject to Section 5, Article 1.10.
(c) The shareholders of the company shall be informed of a call under Subsection (b):
(1) by personal notice; or
(2) by advertisement for the time and in the manner approved by the commissioner. (V.T.I.C. Arts. 6.05, 6.06 (part).)
Sec. 862.153. FAILURE OF SHAREHOLDER TO PAY. (a) If a shareholder of the insurance company who is given notice under Section 862.152 does not pay the amount called for by the company under that section, the company may:
(1) require the return of the original certificate of stock held by the shareholder; and
(2) issue a new certificate for a number of shares that the shareholder may be entitled to in the proportion that the value of the funds of the company, computed without inclusion of any money or other property paid by shareholders in response to the notice under Section 862.152, bears to the total amount of the original capital and the minimum surplus of the company required by Section 822.054 or 822.210, subject to Section 5, Article 1.10.
(b) The value of any shares for which new certificates are issued under Subsection (a)(2) shall be computed under the direction of the commissioner. The insurance company shall pay for the fractional parts of shares.
(c) Any interested person may pay all or any part of the amount of the deficit resulting from a shareholder default under Subsection (a). The company shall issue to each person who makes a payment a stock certificate that is representative of the number of shares to which the person is entitled. The certificate must be for the number of shares in proportion to the total number of forfeited shares that the payment made by the person bears to the deficit that resulted from the forfeited shares. (V.T.I.C. Art. 6.06 (part).)
Sec. 862.154. CREATION AND DISPOSAL OF NEW STOCK. (a) A fire, marine, or inland insurance company that complies with Sections 822.155, 822.157, and 822.158 may:
(1) create new stock;
(2) dispose of the new stock according to applicable law; and
(3) issue new certificates for the new stock.
(b) The insurance company shall sell any new stock created under Subsection (a) for an amount sufficient to make up any impairment of the company's required minimum capital and to make up the surplus of the company as required by Section 822.054 or 822.210, subject to Section 5, Article 1.10, but may not impair the capital of the company. (V.T.I.C. Art. 6.07.)
[Chapters 863-880 reserved for expansion]
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND
RELATED ENTITIES
CHAPTER 881. STATEWIDE MUTUAL ASSESSMENT COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 881.001. DEFINITION
Sec. 881.002. LIMITED EXEMPTION FROM INSURANCE
LAWS
Sec. 881.003. COMPLIANCE WITH INSURANCE LAWS
Sec. 881.004. EXEMPTION FROM CHAPTER
Sec. 881.005. ORGANIZATION OF NEW COMPANY PROHIBITED
Sec. 881.006. ANNUAL STATEMENT
[Sections 881.007-881.050 reserved for expansion]
SUBCHAPTER B. STRUCTURE AND OPERATION OF STATEWIDE
MUTUAL ASSESSMENT COMPANIES
Sec. 881.051. AUTHORITY TO ACT AS STATEWIDE MUTUAL
ASSESSMENT COMPANY
Sec. 881.052. APPLICABILITY OF TEXAS NON-PROFIT
CORPORATION ACT
Sec. 881.053. SEPARATE GROUPS, CLUBS, OR CLASSES
Sec. 881.054. MINIMUM MEMBERSHIP REQUIRED
Sec. 881.055. USE OF COMPANY NAME
Sec. 881.056. ISSUANCE OF CERTIFICATE OR POLICY TO
SEPARATE GROUPS, CLUBS, OR CLASSES
Sec. 881.057. INSUFFICIENT MEMBERSHIP: CONSOLIDATION
OR DISCONTINUATION OF GROUP, CLUB, OR CLASS OR
LIQUIDATION OF COMPANY
Sec. 881.058. AGENT
[Sections 881.059-881.100 reserved for expansion]
SUBCHAPTER C. BENEFITS PROVIDED BY STATEWIDE MUTUAL
ASSESSMENT COMPANIES
Sec. 881.101. TYPES OF CERTIFICATES OR POLICIES AUTHORIZED
Sec. 881.102. MAXIMUM BENEFIT UNDER CERTIFICATE OR POLICY
Sec. 881.103. LOCATION OF ISSUANCE OF CERTIFICATES OR POLICIES
Sec. 881.104. CERTIFICATE OR POLICY AND APPLICATION;
REPRESENTATIONS IN APPLICATION
[Sections 881.105-881.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT; CRIMINAL PENALTY
Sec. 881.701. GENERAL CRIMINAL PENALTY
Sec. 881.702. ENFORCEMENT BY ATTORNEY GENERAL
CHAPTER 881. STATEWIDE MUTUAL ASSESSMENT COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 881.001. DEFINITION. In this chapter, "statewide mutual assessment company" means a corporation engaged in the statewide business of mutually protecting or insuring members' lives with money provided by assessments on those members. (V.T.I.C. Art. 13.01 (part); New.)
Sec. 881.002. LIMITED EXEMPTION FROM INSURANCE LAWS. (a) Except as provided by this chapter and Chapter 887, the insurance laws of this state do not apply to a statewide mutual assessment company.
(b) A law enacted after June 20, 1933, does not apply to statewide mutual assessment companies unless statewide mutual assessment companies are expressly designated in the law. (V.T.I.C. Art. 13.09, Subsec. (a) (part).)
Sec. 881.003. COMPLIANCE WITH INSURANCE LAWS. An individual, firm, unincorporated association, or corporation may not engage in business as a statewide mutual assessment company in this state unless the entity complies with this chapter and Chapter 887. (V.T.I.C. Arts. 13.01 (part); 13.06 (part).)
Sec. 881.004. EXEMPTION FROM CHAPTER. This chapter applies only to a statewide mutual assessment company. This chapter does not apply to a company operating as a local mutual aid association, fraternal benefit society, or reciprocal exchange or to a foreign assessment company operating under any other law in this state. (V.T.I.C. Art. 13.09, Subsec. (a) (part).)
Sec. 881.005. ORGANIZATION OF NEW COMPANY PROHIBITED. A new statewide mutual assessment company may not be organized under this chapter. (New.)
Sec. 881.006. ANNUAL STATEMENT. (a) For the filing of each annual statement, the department shall charge the appropriate fee. The fee must be deposited in the Texas Department of Insurance operating account.
(b) Article 1.31A applies to the fee. (V.T.I.C. Art. 13.08.)
[Sections 881.007-881.050 reserved for expansion]
SUBCHAPTER B. STRUCTURE AND OPERATION OF STATEWIDE
MUTUAL ASSESSMENT COMPANIES
Sec. 881.051. AUTHORITY TO ACT AS STATEWIDE MUTUAL ASSESSMENT COMPANY. A corporation may engage in business as a statewide mutual assessment company only if the corporation:
(1) was incorporated in this state under a law that was amended, repealed, or reenacted before June 20, 1933;
(2) was engaged in business as a statewide mutual assessment company in this state on December 31, 1932;
(3) does not have capital stock; and
(4) is not for profit. (V.T.I.C. Art. 13.01 (part).)
Sec. 881.052. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (a) Except to the extent of any conflict with this code, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a statewide mutual assessment company. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to statewide mutual assessment companies.
(b) On advance approval of the commissioner, a statewide mutual assessment company may pay dividends to its members. (V.A.C.S. Art. 1396-10.04, Sec. B (part).)
Sec. 881.053. SEPARATE GROUPS, CLUBS, OR CLASSES. A statewide mutual assessment company may provide in its by-laws for the creation of separate groups, clubs, or classes based on reasonable classifications specified in the by-laws. (V.T.I.C. Art. 13.03 (part).)
Sec. 881.054. MINIMUM MEMBERSHIP REQUIRED. A statewide mutual assessment company may not issue a certificate or policy unless the membership of the company or the group, class, or club of the company that is liable for assessments on the certificate or policy is sufficient in number at the assessment rate charged the company, group, class, or club to pay 50 percent of the maximum benefit in the certificate or policy. (V.T.I.C. Art. 13.05 (part).)
Sec. 881.055. USE OF COMPANY NAME. A statewide mutual assessment company may not operate an independent branch office or a separate group, club, or class under a name different from the name of the company. (V.T.I.C. Art. 13.03 (part).)
Sec. 881.056. ISSUANCE OF CERTIFICATE OR POLICY TO SEPARATE GROUPS, CLUBS, OR CLASSES. (a) A certificate or policy issued by the company to members of a group, club, or class may limit benefits under the certificate or policy to the assessments made, levied, and collected from the group, club, or class.
(b) The assets or benefits of a group, club, or class may not be pledged or transferred without the consent of at least three-fourths of the members of the group, club, or class. (V.T.I.C. Art. 13.03 (part).)
Sec. 881.057. INSUFFICIENT MEMBERSHIP: CONSOLIDATION OR DISCONTINUATION OF GROUP, CLUB, OR CLASS OR LIQUIDATION OF COMPANY. (a) If membership of a group, club, or class of a statewide mutual assessment company is less than the number required by Section 881.054, the company shall immediately notify:
(1) the members of the group, club, or class; or
(2) if the company has only one group, club, or class, the members of the company.
(b) Not later than six months after a statewide mutual assessment company notifies the members of a group, club, or class under Subsection (a)(1), the company shall:
(1) increase the membership of the group, club, or class to at least the number required by Section 881.054;
(2) consolidate the group, club, or class with another group, club, or class; or
(3) discontinue the group, club, or class.
(c) Not later than six months after a statewide mutual assessment company notifies the members of the company under Subsection (a)(2), the company shall increase the membership to at least the number required by Section 881.054. If the membership is not increased to at least that number, the commissioner shall take steps to liquidate the company under Subchapter L, Chapter 887. (V.T.I.C. Art. 13.05 (part).)
Sec. 881.058. AGENT. (a) A person who solicits an application for a certificate or policy providing insurance on the life of another is considered to be an agent of the statewide mutual assessment company that issues the certificate or policy in a controversy between the company and the insured or the insured's beneficiary.
(b) An agent described by Subsection (a) may not waive or alter the terms of an application, certificate, or policy. (V.T.I.C. Art. 13.04 (part).)
[Sections 881.059-881.100 reserved for expansion]
SUBCHAPTER C. BENEFITS PROVIDED BY STATEWIDE
MUTUAL ASSESSMENT COMPANIES
Sec. 881.101. TYPES OF CERTIFICATES OR POLICIES AUTHORIZED. (a) A statewide mutual assessment company may issue only a certificate or policy that provides for the continuous payment of premiums or assessments during the policyholder's life.
(b) A statewide mutual assessment company may not:
(1) issue a certificate or policy on a limited payment plan; or
(2) promise to pay an endowment or annuity benefit. (V.T.I.C. Art. 13.04 (part).)
Sec. 881.102. MAXIMUM BENEFIT UNDER CERTIFICATE OR POLICY. A statewide mutual assessment company may not issue a certificate or policy that provides a benefit that exceeds $5,000. (V.T.I.C. Art. 13.05 (part).)
Sec. 881.103. LOCATION OF ISSUANCE OF CERTIFICATES OR POLICIES. A statewide mutual assessment company may issue certificates or policies only in the home office of the company. (V.T.I.C. Art. 13.03 (part).)
Sec. 881.104. CERTIFICATE OR POLICY AND APPLICATION; REPRESENTATIONS IN APPLICATION. (a) An application for a certificate or policy may not be used as a defense against a claim or loss under the certificate or policy unless a copy of the application is attached to the certificate or policy.
(b) A misrepresentation in an application for a certificate or policy may not be used as a defense against a claim or loss under the certificate or policy unless it is shown that the misrepresentation is material to the risk assumed. (V.T.I.C. Art. 13.04 (part).)
[Sections 881.105-881.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT; CRIMINAL PENALTY
Sec. 881.701. GENERAL CRIMINAL PENALTY. (a) A person commits an offense if:
(1) the person violates this chapter; or
(2) the person:
(A) is a corporation or a responsible officer of a corporation; and
(B) permits or participates in a violation of this chapter by a corporation.
(b) An offense under this section is a misdemeanor punishable by a fine not to exceed $500. (V.T.I.C. Art. 13.07 (part).)
Sec. 881.702. ENFORCEMENT BY ATTORNEY GENERAL. (a) The attorney general may enforce the penalty provided under Section 881.701 and Section 887.705 against a corporation or unincorporated association.
(b) Notwithstanding Section 887.209, venue of a prosecution under this section may be in Travis County. (V.T.I.C. Art. 13.07 (part).)
CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 882.001. APPLICABILITY OF THIS CHAPTER AND OTHER
LAW
Sec. 882.002. EXAMINATION OF COMPANY
Sec. 882.003. ANNUAL STATEMENT
[Sections 882.004-882.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF MUTUAL LIFE
INSURANCE COMPANY
Sec. 882.051. AUTHORITY TO FORM COMPANY; PURPOSE
Sec. 882.052. FORMATION OF COMPANY; ARTICLES OF
INCORPORATION
Sec. 882.053. COMPANY'S NAME
Sec. 882.054. INITIAL BOARD OF DIRECTORS; TERM
Sec. 882.055. UNENCUMBERED SURPLUS REQUIREMENTS
Sec. 882.056. APPLICATION FOR CHARTER
Sec. 882.057. APPLICATION PROCESS
Sec. 882.058. ACTION ON APPLICATION
Sec. 882.059. EXAMINATION AFTER DETERMINATION
[Sections 882.060-882.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 882.101. ISSUANCE OF CERTIFICATE OF
AUTHORITY
[Sections 882.102-882.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF MUTUAL LIFE INSURANCE COMPANY
Sec. 882.151. BOARD OF DIRECTORS
Sec. 882.152. ADOPTION OF INITIAL BYLAWS
Sec. 882.153. ANNUAL MEETING
Sec. 882.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS
Sec. 882.155. VOTING BY POLICYHOLDERS
Sec. 882.156. OFFICERS
Sec. 882.157. OFFICER BONDS
Sec. 882.158. BYLAWS MUST COMPLY WITH LAW
[Sections 882.159-882.200 reserved for expansion]
SUBCHAPTER E. AGENTS
Sec. 882.201. APPLICABILITY OF SUBCHAPTER
Sec. 882.202. ISSUANCE OF LICENSE TO AGENT
Sec. 882.203. LIMITATION ON AGENT COMPENSATION
[Sections 882.204-882.250 reserved for expansion]
SUBCHAPTER F. GENERAL FINANCIAL REQUIREMENTS
Sec. 882.251. LIMITED AUTHORITY TO BORROW MONEY
Sec. 882.252. INVESTMENT OF MONEY
Sec. 882.253. LOANS TO COMPANY
[Sections 882.254-882.300 reserved for expansion]
SUBCHAPTER G. UNENCUMBERED SURPLUS REQUIREMENTS
Sec. 882.301. AMOUNT OF UNENCUMBERED SURPLUS
Sec. 882.302. EXEMPTION FOR CERTAIN COMPANIES
Sec. 882.303. UNENCUMBERED SURPLUS LESS THAN $25,000
Sec. 882.304. INVESTMENT OF EXCESS UNENCUMBERED
SURPLUS
Sec. 882.305. IMPAIRMENT OF UNENCUMBERED SURPLUS
Sec. 882.306. IMPAIRMENT OF UNENCUMBERED SURPLUS;
APPOINTMENT OF RECEIVER
[Sections 882.307-882.350 reserved for expansion]
SUBCHAPTER H. DIVIDENDS
Sec. 882.351. POLICYHOLDER'S ENTITLEMENT TO DIVIDEND
Sec. 882.352. ACCOUNTING AND PROCEDURE FOR ALLOCATION OF
DIVISIBLE SURPLUS; REPORT TO COMMISSIONER
Sec. 882.353. DEPARTMENT APPROVAL OF ALLOCATION;
REVISIONS
Sec. 882.354. DIVIDEND PAYMENT METHOD
Sec. 882.355. LIMITATIONS ON DIVISIBLE SURPLUS
Sec. 882.356. PAYMENT OF DIVIDENDS NOT REQUIRED
[Sections 882.357-882.400 reserved for expansion]
SUBCHAPTER I. CONTINGENCY RESERVE
Sec. 882.401. AMOUNT OF CONTINGENCY RESERVE
Sec. 882.402. EXCESS CONTINGENCY RESERVE
Sec. 882.403. CONTINGENCY RESERVE REQUIREMENTS
Sec. 882.404. ALLOCATION OF CONTINGENCY RESERVE TO
UNENCUMBERED SURPLUS
Sec. 882.405. DESIGNATION OF CONTINGENCY RESERVE AS
UNASSIGNED SURPLUS
[Sections 882.406-882.450 reserved for expansion]
SUBCHAPTER J. POLICY REQUIREMENTS
Sec. 882.451. APPLICABILITY OF CERTAIN PROVISIONS
Sec. 882.452. TYPE OF POLICY AUTHORIZED
Sec. 882.453. POLICY FORM
Sec. 882.454. LIMITATION ON AMOUNT OF POLICY VALUE FOR
CERTAIN COMPANIES
Sec. 882.455. TABLE OF GUARANTEED VALUES
[Sections 882.456-882.500 reserved for expansion]
SUBCHAPTER K. TOTAL ASSUMPTION REINSURANCE AGREEMENTS
Sec. 882.501. TOTAL ASSUMPTION REINSURANCE AGREEMENTS BETWEEN
LIFE INSURANCE COMPANIES
[Sections 882.502-882.550 reserved for expansion]
SUBCHAPTER L. MERGERS AND CONSOLIDATIONS
Sec. 882.551. APPLICABILITY OF SUBCHAPTER
Sec. 882.552. AUTHORITY TO MERGE OR CONSOLIDATE
Sec. 882.553. PROPOSED PLAN OF MERGER OR CONSOLIDATION;
FILING WITH COMMISSIONER
Sec. 882.554. HEARING ON PLAN
Sec. 882.555. COMMISSIONER DETERMINATION ON PLAN
Sec. 882.556. APPROVAL OF PLAN BY POLICYHOLDERS
Sec. 882.557. DOMESTIC STOCK LIFE INSURANCE COMPANY;
APPROVAL OF PLAN BY SHAREHOLDERS
Sec. 882.558. FOREIGN LIFE INSURANCE COMPANY; APPROVAL OF
PLAN BY POLICYHOLDERS OR SHAREHOLDERS
Sec. 882.559. FILING OF AFFIDAVIT OF PLAN APPROVAL;
ISSUANCE OF CERTIFICATE OF MERGER OR CONSOLIDATION
Sec. 882.560. EFFECTIVE DATE OF MERGER OR CONSOLIDATION
Sec. 882.561. ASSUMPTION OF OUTSTANDING INSURANCE
POLICIES
Sec. 882.562. ASSUMPTION OF LIABILITIES
Sec. 882.563. EFFECT OF MERGER OR CONSOLIDATION ON PROPERTY
Sec. 882.564. EFFECT OF MERGER OR CONSOLIDATION ON
CERTAIN INVESTMENTS
Sec. 882.565. EFFECT OF MERGER OR CONSOLIDATION ON DIVISIBLE
SURPLUS
Sec. 882.566. EFFECT ON ANTITRUST LAWS
[Sections 882.567-882.600 reserved for expansion]
SUBCHAPTER M. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY
TO STOCK LEGAL RESERVE LIFE INSURANCE COMPANY
Sec. 882.601. AUTHORITY TO CONVERT TO STOCK LEGAL RESERVE
LIFE INSURANCE COMPANY; POLICYHOLDER AUTHORIZATION
REQUIRED
Sec. 882.602. AMENDMENT TO CHARTER OR ARTICLES OF
INCORPORATION REQUIRED
Sec. 882.603. CAPITAL AND SURPLUS REQUIREMENTS
Sec. 882.604. HEARING
Sec. 882.605. CONVERSION ON COMMISSIONER APPROVAL
Sec. 882.606. APPLICABLE LAW AFTER CONVERSION
Sec. 882.607. OTHER TYPES OF CONVERSION NOT PROHIBITED
[Sections 882.608-882.650 reserved for expansion]
SUBCHAPTER N. CONVERSION OF CERTAIN MUTUAL ASSESSMENT
COMPANIES OR ASSOCIATIONS TO MUTUAL LIFE INSURANCE COMPANIES
Sec. 882.651. AUTHORITY TO CONVERT
Sec. 882.652. VOLUNTARY CONVERSION
Sec. 882.653. CONVERSION REQUIREMENTS
Sec. 882.654. EXEMPTION FROM SURPLUS REQUIREMENTS
Sec. 882.655. APPLICABLE LAW AFTER CONVERSION
[Sections 882.656-882.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT PROVISIONS
Sec. 882.701. APPLICABILITY OF SUBCHAPTER
Sec. 882.702. INVESTMENT AND DEPOSIT OF FUNDS; CRIMINAL
PENALTY
Sec. 882.703. POLICY FORM; REVOCATION OF CERTIFICATE
CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 882.001. APPLICABILITY OF THIS CHAPTER AND OTHER LAW. Except to the extent of any conflict with this chapter, a law governing a company organized under Chapter 841 applies to a mutual life insurance company organized under this chapter. (V.T.I.C. Art. 11.19 (part).)
Sec. 882.002. EXAMINATION OF COMPANY. Articles 1.15 and 1.16 apply to a mutual life insurance company organized under this chapter. (V.T.I.C. Art. 11.07.)
Sec. 882.003. ANNUAL STATEMENT. A mutual life insurance company shall file an annual statement with the department. (V.T.I.C. Art. 11.06 (part).)
[Sections 882.004-882.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF MUTUAL LIFE
INSURANCE COMPANY
Sec. 882.051. AUTHORITY TO FORM COMPANY; PURPOSE. A mutual life insurance company may be formed under this chapter to insure the lives of individuals on the mutual level premium and legal reserve plan. (V.T.I.C. Art. 11.01, Sec. 1 (part).)
Sec. 882.052. FORMATION OF COMPANY; ARTICLES OF INCORPORATION. (a) Nine or more persons who are residents of this state may form a mutual life insurance company by executing and acknowledging articles of incorporation for that purpose.
(b) The articles of incorporation of the proposed company must state:
(1) the name and residence of each incorporator;
(2) the name of the company;
(3) the location of the company's principal office at which company business is to be transacted;
(4) the number of directors;
(5) the name and residence of each initial director; and
(6) the amount of the company's unencumbered surplus. (V.T.I.C. Art. 11.01, Sec. 1 (part).)
Sec. 882.053. COMPANY'S NAME. (a) The name of a mutual life insurance company must contain the words "Mutual Life Insurance Company."
(b) A mutual life insurance company's name may not be so similar to the name of another insurance company as to likely mislead the public. (V.T.I.C. Art. 11.01, Sec. 1 (part).)
Sec. 882.054. INITIAL BOARD OF DIRECTORS; TERM. An initial director named as provided in Section 882.052 serves until:
(1) the first annual election of directors;
(2) the initial director's successor qualifies for office; or
(3) the initial director is removed from the board for improper practices. (V.T.I.C. Art. 11.01, Sec. 1 (part); Art. 11.03 (part).)
Sec. 882.055. UNENCUMBERED SURPLUS REQUIREMENTS. A mutual life insurance company must possess at the time of incorporation unencumbered surplus in an amount of at least $200,000. The unencumbered surplus may consist only of:
(1) United States currency;
(2) bonds of the United States, this state, or a county or municipality of this state; or
(3) government insured mortgage loans that are authorized by this chapter, with not more than 25 percent of the unencumbered surplus invested in first mortgage real estate loans. (V.T.I.C. Art. 11.01, Sec. 1 (part).)
Sec. 882.056. APPLICATION FOR CHARTER. (a) To obtain a charter for a mutual life insurance company under this chapter, the incorporators must pay the charter fee in the amount determined under Article 4.07 and file with the department:
(1) an application for charter on the form and including the information prescribed by the commissioner;
(2) the company's articles of incorporation; and
(3) an affidavit made by two or more of the incorporators that states that:
(A) the unencumbered surplus requirements of Section 882.055 are satisfied;
(B) the unencumbered surplus is the bona fide property of the company; and
(C) the information in the application and articles of incorporation is true and correct.
(b) The commissioner may require that the incorporators provide at their expense additional evidence of a matter required in the affidavit before the commissioner takes further action on the application for the charter.
(c) The charter must state the name of each director who is to serve until the first annual election. (V.T.I.C. Art. 11.02, Sec. 1 (part); Art. 11.03 (part).)
Sec. 882.057. APPLICATION PROCESS. (a) After the charter fee is paid and all items required for a charter under Section 882.056 are filed with the department, the commissioner may set a date for a hearing on the application.
(b) The date for a hearing on an application may not be before the 11th or later than the 60th day after the date notice is provided under Subsection (c).
(c) The commissioner shall:
(1) provide written notice of the date of a hearing to:
(A) the person or persons who filed the application; and
(B) any interested party, including any other party who had previously requested a copy of the notice; and
(2) publish, at the expense of the incorporators, a copy of the notice in a newspaper of general circulation in the county in which the mutual life insurance company's home office is proposed to be located.
(d) The department shall make a record of the proceedings of a hearing under this section.
(e) An interested party is entitled to oppose or support the granting or denial of the application and may intervene and participate fully and in all respects in any hearing or other proceeding on the application. An intervenor has the rights and privileges of a proper or necessary party in a civil suit in the courts of this state, including the right to be represented by counsel. (V.T.I.C. Art. 11.02, Sec. 1 (part).)
Sec. 882.058. ACTION ON APPLICATION. (a) In considering the application, the commissioner, not later than the 30th day after the date a hearing under Section 882.057 is completed, shall determine if:
(1) the minimum unencumbered surplus required by Section 882.055 is the bona fide property of the mutual life insurance company;
(2) the proposed officers, directors, and managing executives of the company have sufficient insurance experience, ability, and standing to make success of the proposed company probable; and
(3) the applicants are acting in good faith.
(b) If the commissioner determines by an affirmative finding any of the issues under Subsection (a) adversely to the applicants, the commissioner shall reject the application in writing, giving the reason for the rejection. An application may not be granted unless it is adequately supported by competent evidence.
(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application. (V.T.I.C. Art. 11.02, Sec. 1 (part).)
Sec. 882.059. EXAMINATION AFTER DETERMINATION. After making a determination on an application under Section 882.058, the commissioner shall immediately make or cause to be made a full and thorough examination of the mutual life insurance company. The company shall pay for the examination. (V.T.I.C. Art. 11.02, Sec. 2 (part).)
[Sections 882.060-882.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 882.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) After the examination of a mutual life insurance company under Section 882.059, the commissioner shall issue a certificate of authority to the company if the commissioner finds that:
(1) the company has complied with all applicable laws;
(2) the company satisfies the unencumbered surplus requirements of Section 882.055; and
(3) the company's unencumbered surplus is in the custody of the company's officers.
(b) A certificate of authority issued under this section authorizes the company to engage in the business of life, health, or accident insurance in this state as may be specified in the company's charter or charter application. (V.T.I.C. Art. 11.02, Sec. 2 (part).)
[Sections 882.102-882.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF MUTUAL LIFE INSURANCE COMPANY
Sec. 882.151. BOARD OF DIRECTORS. (a) The board of directors of a mutual life insurance company controls the business of the company.
(b) The board of directors consists of at least five directors as stated in the company's articles of incorporation. (V.T.I.C. Art. 11.03 (part).)
Sec. 882.152. ADOPTION OF INITIAL BYLAWS. (a) At the first meeting of the initial board of directors of a mutual life insurance company after the department issues a certificate of authority to the company, the board shall adopt the initial bylaws of the company.
(b) The bylaws adopted under Subsection (a) shall govern the company until the first annual meeting of the board of directors. (V.T.I.C. Art. 11.03 (part).)
Sec. 882.153. ANNUAL MEETING. (a) Except as provided by Subsection (b), after a mutual life insurance company is issued a certificate of authority under Section 882.101, the company shall hold an annual meeting of the policyholders on the fourth Tuesday in April at the home office of the company or another location properly announced to each policyholder.
(b) The bylaws of a mutual life insurance company may establish an annual meeting date different than the date under Subsection (a). A meeting date established under this subsection must be before April 30 of each year.
(c) At each annual meeting, the policyholders:
(1) shall elect the company's board of directors to serve until the next annual meeting, except as provided by Section 882.154; and
(2) may adopt, amend, or repeal the bylaws of the company. (V.T.I.C. Arts. 11.03 (part), 11.04 (part).)
Sec. 882.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a) This section applies only to a mutual life insurance company whose board of directors consists of at least nine members.
(b) The bylaws of a mutual life insurance company may provide that the company's directors, other than initial directors, may be elected to serve staggered terms as provided by this section.
(c) The company's directors shall be divided into two or three classes, with each class consisting of an equal number of directors to the extent possible. After the directors are divided into classes:
(1) the terms of the directors in the first class expire on the first annual meeting date after their initial election;
(2) the terms of the directors in the second class expire on the second annual meeting date after their initial election; and
(3) the terms of the directors in the third class, if any, expire on the third annual meeting date after their initial election.
(d) At each annual meeting after the directors are first elected, the policyholders shall elect the number of directors whose terms expire on that date. Directors are elected for:
(1) staggered two-year terms, if the board is divided into two classes; or
(2) staggered three-year terms, if the board is divided into three classes. (V.T.I.C. Art. 11.04 (part).)
Sec. 882.155. VOTING BY POLICYHOLDERS. (a) At an annual or special meeting of a mutual life insurance company, each policyholder is entitled to one vote for each $500 of insurance held by the policyholder in the company.
(b) A policyholder may vote at an annual or special meeting by proxy, unless the proxy is revoked before the meeting. (V.T.I.C. Art. 11.04 (part).)
Sec. 882.156. OFFICERS. (a) The board of directors of a mutual life insurance company shall elect the following officers for the company:
(1) a president;
(2) the number of vice presidents as required by the company's bylaws;
(3) a secretary;
(4) a treasurer;
(5) a medical director; and
(6) other officers as required by the company's bylaws.
(b) The board shall establish the compensation of each officer.
(c) The duties of each officer shall be prescribed by the company's bylaws. (V.T.I.C. Art. 11.03 (part).)
Sec. 882.157. OFFICER BONDS. The president, secretary, and treasurer of a mutual life insurance company shall each provide a bond for the protection of the company's policyholders:
(1) in an amount and with sureties approved by the commissioner; and
(2) conditioned on the faithful performance of the officer's duties. (V.T.I.C. Art. 11.05.)
Sec. 882.158. BYLAWS MUST COMPLY WITH LAW. The bylaws of a mutual life insurance company may not be inconsistent with this chapter or other laws of this state. (V.T.I.C. Art. 11.04 (part).)
[Sections 882.159-882.200 reserved for expansion]
SUBCHAPTER E. AGENTS
Sec. 882.201. APPLICABILITY OF SUBCHAPTER. This subchapter does not apply to a mutual life insurance company organized under this chapter that has a surplus of at least the minimum amount of capital and surplus required of a capital stock company under Sections 841.054, 841.204, 841.205, 841.301, and 841.302. (New.)
Sec. 882.202. ISSUANCE OF LICENSE TO AGENT. On written request of a mutual life insurance company to which a certificate of authority has been issued under this chapter, the department shall issue a license to each agent of the company. (V.T.I.C. Art. 11.08 (part).)
Sec. 882.203. LIMITATION ON AGENT COMPENSATION. A contract between a mutual life insurance company and an agent of the company to which a license has been issued under Section 882.202 may not provide a commission or other compensation to the agent that exceeds the expense loading in the premiums on policies that are issued on applications obtained by the agent and for which the premiums are collected and paid to the company in cash. (V.T.I.C. Art. 11.08 (part).)
[Sections 882.204-882.250 reserved for expansion]
SUBCHAPTER F. GENERAL FINANCIAL REQUIREMENTS
Sec. 882.251. LIMITED AUTHORITY TO BORROW MONEY. (a) Except as provided by this subchapter, a mutual life insurance company may not borrow money for any purpose other than to pay a death loss.
(b) A company may not incur a debt on an account for which any part of the company's assets that exceeds the assets represented by or derived from the expense loading in the premiums collected by the company is subject to execution on a judgment.
(c) Subsection (b) does not prohibit a company from incurring a debt on an account:
(1) under a policy issued by the company; or
(2) to borrow money to pay a death loss. (V.T.I.C. Art. 11.15.)
Sec. 882.252. INVESTMENT OF MONEY. (a) A mutual life insurance company shall invest the company's money in accordance with the law governing investments of life, health, and accident insurance companies organized under Chapter 841.
(b) An officer of a mutual life insurance company who does not invest the money of the company as required by Subsection (a) shall deposit the money in the name of the company in a bank that:
(1) is subject to state or federal regulation; and
(2) has been approved by the commissioner as a depository for that purpose. (V.T.I.C. Arts. 11.18, 11.18-1 (part).)
Sec. 882.253. LOANS TO COMPANY. (a) An officer or director of a mutual life insurance company, or a person authorized under Chapter 825, may loan to the company money to:
(1) promote or conserve the company's business; or
(2) enable the company to comply with a legal requirement.
(b) The company may repay a loan and agreed interest, at an annual rate not to exceed 10 percent, from the surplus remaining after the company provides for the company's reserves and other liabilities.
(c) A loan under this section or interest on a loan is not otherwise a liability or claim against the company or any of its assets.
(d) A mutual life insurance company may not pay a commission or promotion expense in connection with a loan made to the company.
(e) A mutual life insurance company shall report in its annual statement the amount of each loan. (V.T.I.C. Art. 11.16.)
[Sections 882.254-882.300 reserved for expansion]
SUBCHAPTER G. UNENCUMBERED SURPLUS REQUIREMENTS
Sec. 882.301. AMOUNT OF UNENCUMBERED SURPLUS. (a) A mutual life insurance company that engages in the business of insurance in this state shall maintain an unencumbered surplus of at least $100,000 that consists of cash or classes of investment as provided by Section 882.055.
(b) Except as otherwise authorized by this code, a company that does not maintain an unencumbered surplus as required by this section may not write new insurance. (V.T.I.C. Art. 11.01, Sec. 1 (part); Art. 11.17 (part).)
Sec. 882.302. EXEMPTION FOR CERTAIN COMPANIES. A mutual life insurance company that was authorized and engaged in the business of insurance in this state before May 1, 1955, is not required to increase the amount or convert the class or form of the company's existing unencumbered surplus to comply with Section 882.301 and may not be prohibited from writing new insurance because the company does not maintain an unencumbered surplus as required by that section if the company complies with all other laws. (V.T.I.C. Art. 11.01, Sec. 2(a) (part).)
Sec. 882.303. UNENCUMBERED SURPLUS LESS THAN $25,000. A mutual life insurance company whose unencumbered surplus is less than $25,000 shall allocate at least 25 percent of the company's net earned surplus for the preceding calendar year to the company's unencumbered surplus until the company has obtained an unencumbered surplus of at least $25,000. (V.T.I.C. Art. 11.12 (part).)
Sec. 882.304. INVESTMENT OF EXCESS UNENCUMBERED SURPLUS. A mutual life insurance company that is granted a charter under this chapter may invest that part of the company's unencumbered surplus that exceeds $100,000 as provided by this code for companies operating under Chapter 841. (V.T.I.C. Art. 11.01, Sec. 1 (part).)
Sec. 882.305. IMPAIRMENT OF UNENCUMBERED SURPLUS. (a) If one-third or more of a mutual life insurance company's unencumbered surplus as required by Section 882.301 is impaired, the company shall correct the impairment not later than the 60th day after the date the surplus is impaired.
(b) A company that does not correct an impairment of surplus as required by Subsection (a) may not write insurance in this state until the company corrects the impairment.
(c) In determining whether a company's surplus is impaired, the company shall compute its liabilities in the manner provided by state law. (V.T.I.C. Art. 11.17 (part).)
Sec. 882.306. IMPAIRMENT OF UNENCUMBERED SURPLUS; APPOINTMENT OF RECEIVER. (a) If one-half or more of a mutual life insurance company's unencumbered surplus as required by Section 882.301 is impaired, the commissioner may apply to a court for the appointment of a receiver to wind up the affairs of the company.
(b) In determining whether a company's surplus is impaired, the company shall compute its reserve liability in the manner provided by state law. (V.T.I.C. Art. 11.17 (part).)
[Sections 882.307-882.350 reserved for expansion]
SUBCHAPTER H. DIVIDENDS
Sec. 882.351. POLICYHOLDER'S ENTITLEMENT TO DIVIDEND. A policyholder of a mutual life insurance company is entitled to a credit or payment of a dividend from that part of the company's divisible surplus that may be fairly allocated to the policyholder's policy. (V.T.I.C. Art. 11.12 (part).)
Sec. 882.352. ACCOUNTING AND PROCEDURE FOR ALLOCATION OF DIVISIBLE SURPLUS; REPORT TO COMMISSIONER. (a) On December 31 of each year, or as soon after as practicable, each mutual life insurance company shall determine the amount of surplus earned by the company during that year.
(b) Not later than the end of the second year in which a policy issued by the company is in effect, the company shall provide to the policyholder:
(1) an annual accounting of the company's divisible surplus; and
(2) if all premiums due on the policy have been paid for at least two years, a fair allocation of the company's divisible surplus that remains after deducting:
(A) any amount approved by the commissioner for retirement of any unpaid loans made under Section 882.253;
(B) the company's contingency reserve; and
(C) any earned surplus the company allocated to unencumbered surplus as provided by this chapter.
(c) The company shall immediately submit to the commissioner a detailed report of an allocation of divisible surplus made under this section. The president or secretary of the company shall sign the report under oath. (V.T.I.C. Art. 11.12 (part).)
Sec. 882.353. DEPARTMENT APPROVAL OF ALLOCATION; REVISIONS. (a) The department shall approve a mutual life insurance company's allocation of divisible surplus under Section 882.352 if the department finds that the allocation is fair to the policyholders and complies with this chapter.
(b) If the department does not approve a company's allocation of surplus, the department shall revise the allocation in a manner that the department determines is fair to the policyholders and necessary to comply with this chapter. The department shall certify the revisions to the company.
(c) An allocation of surplus approved under Subsection (a) takes effect on the date of approval. An allocation of surplus revised by the department under Subsection (b) takes effect on the date the department certifies the revisions to the company. (V.T.I.C. Art. 11.12 (part).)
Sec. 882.354. DIVIDEND PAYMENT METHOD. (a) A dividend declared by a mutual life insurance company under this subchapter shall be paid in:
(1) cash; or
(2) the equivalent of the dividend's cash value as provided by an option stated in the policy and selected by the policyholder.
(b) A policyholder shall notify the company in writing of an option selected by the policyholder under Subsection (a)(2). (V.T.I.C. Art. 11.12 (part).)
Sec. 882.355. LIMITATIONS ON DIVISIBLE SURPLUS. A mutual life insurance company's divisible surplus available for payment of dividends to the company's policyholders may not include:
(1) any part of the company's unencumbered surplus that has been:
(A) allocated from the company's earned surplus;
(B) transferred from the company's contingency reserve; or
(C) otherwise acquired by the company;
(2) if the company was organized after September 5, 1955, any part of the company's unencumbered surplus required to comply with Section 882.301; or
(3) if the company's unencumbered surplus is less than $25,000, the part of the company's earned surplus for the preceding calendar year in excess of 75 percent of the earned surplus. (V.T.I.C. Art. 11.12 (part).)
Sec. 882.356. PAYMENT OF DIVIDENDS NOT REQUIRED. This subchapter does not require a mutual life insurance company to pay a dividend to a policyholder if the unencumbered surplus acquired by the company is impaired. (V.T.I.C. Art. 11.12 (part).)
[Sections 882.357-882.400 reserved for expansion]
SUBCHAPTER I. CONTINGENCY RESERVE
Sec. 882.401. AMOUNT OF CONTINGENCY RESERVE. (a) A mutual life insurance company organized under this chapter may maintain a contingency reserve that exceeds the reserves and liabilities provided by this chapter. The amount of the contingency reserve may not exceed the greater of:
(1) $10,000;
(2) an amount that:
(A) equals 20 percent of the company's policy reserves and policy liabilities plus one percent of the amount of the company's life insurance in force; and
(B) does not exceed $750,000; or
(3) an amount that equals 20 percent of the company's policy reserves and policy liabilities.
(b) In determining the amount of a company's policy reserves and policy liabilities for purposes of this section, the company may only include the following, after deducting the net value of the company's risks reinsured by other solvent assuming insurers:
(1) the company's reserves on outstanding life insurance policies and annuity contracts, contracts issued as supplemental to the policies or contracts or in connection with the policies or contracts or provisions included in policies or contracts that insure against disability or accidental death; and
(2) the company's liabilities for:
(A) optional modes of settlement; or
(B) dividends left on deposit at interest. (V.T.I.C. Art. 11.11 (part).)
Sec. 882.402. EXCESS CONTINGENCY RESERVE. (a) The commissioner, for good cause shown, may issue an order authorizing a mutual life insurance company to maintain a contingency reserve that exceeds the amount of the reserve authorized by Section 882.401.
(b) The order must state:
(1) a period not exceeding one year during which the company may maintain the excess contingency reserve; and
(2) each reason for authorizing the excess contingency reserve. (V.T.I.C. Art. 11.11 (part).)
Sec. 882.403. CONTINGENCY RESERVE REQUIREMENTS. (a) A mutual life insurance company's contingency reserve as authorized by this subchapter must be:
(1) invested as provided by law; and
(2) used only to pay death claims and dividends to policyholders.
(b) If the interest and earnings from the investment of a company's contingency reserve exceed the amount of reserve authorized by Section 882.401 or 882.402, the company shall pay the excess amount to the policyholders of the company in the form of dividends as provided by law. (V.T.I.C. Art. 11.11 (part).)
Sec. 882.404. ALLOCATION OF CONTINGENCY RESERVE TO UNENCUMBERED SURPLUS. If a mutual life insurance company's unencumbered surplus is less than $100,000, the company may allocate any part of the company's contingency reserve to the company's unencumbered surplus. (V.T.I.C. Art. 11.01, Sec. 2(b).)
Sec. 882.405. DESIGNATION OF CONTINGENCY RESERVE AS UNASSIGNED SURPLUS. The contingency reserve described by this subchapter is and may be treated as unassigned surplus, including designating the contingency reserve as unassigned surplus in financial statements. (V.T.I.C. Art. 11.11 (part).)
[Sections 882.406-882.450 reserved for expansion]
SUBCHAPTER J. POLICY REQUIREMENTS
Sec. 882.451. APPLICABILITY OF CERTAIN PROVISIONS. Sections 882.452, 882.453, and 882.454 do not apply to a mutual life insurance company organized under this chapter that has a surplus of at least the minimum amount of capital and surplus required of a capital stock company under Sections 841.054, 841.204, 841.205, 841.301, and 841.302. (New.)
Sec. 882.452. TYPE OF POLICY AUTHORIZED. A mutual life insurance company may issue a policy only on the participating plan with dividends payable annually as provided by Subchapter H. (V.T.I.C. Art. 11.13 (part).)
Sec. 882.453. POLICY FORM. An insurance policy issued by a mutual life insurance company must:
(1) be on a form approved by the department; and
(2) contain the following statement on both the front and reverse sides of the policy: "The form of this policy is approved by the Texas Department of Insurance." (V.T.I.C. Art. 11.13 (part).)
Sec. 882.454. LIMITATION ON AMOUNT OF POLICY VALUE FOR CERTAIN COMPANIES. If the total amount of a mutual life insurance company's insurance in force is less than $10 million, the company may not issue a policy that, after deducting any reinsurance, binds the company for more than $5,000 on a single life. (V.T.I.C. Art. 11.13 (part).)
Sec. 882.455. TABLE OF GUARANTEED VALUES. (a) Each insurance policy issued by a mutual life insurance company must contain a table of guaranteed values. The guaranteed values become nonforfeitable not later than the date of payment of the third full annual premium.
(b) The table of guaranteed values shall be drawn in accordance with the law governing life, health, and accident insurance companies. (V.T.I.C. Art. 11.14.)
[Sections 882.456-882.500 reserved for expansion]
SUBCHAPTER K. TOTAL ASSUMPTION REINSURANCE AGREEMENTS
Sec. 882.501. TOTAL ASSUMPTION REINSURANCE AGREEMENTS BETWEEN LIFE INSURANCE COMPANIES. (a) A domestic mutual life insurance company and any other domestic or foreign life insurance company may enter into a total assumption reinsurance agreement if the company assuming the policies under the agreement is authorized to engage in the kinds of insurance provided by those policies.
(b) Before a total assumption reinsurance agreement may be entered into:
(1) the agreement must be submitted to the department; and
(2) the commissioner must approve the agreement as fully protecting the interests of each domestic company's policyholders.
(c) After an assumption direct reinsurance agreement in which the ceding company is a domestic mutual insurance company is approved by the commissioner as required by Subsection (b), the agreement must be approved by the policyholders of the ceding domestic company in the same manner as required for a merger or consolidation under Subchapter L.
(d) When the reinsurance agreement described by Subsection (c) is effective, the assuming company is entitled to the same rights, privileges, and benefits granted a company that assumes a company by merger or consolidation as provided by Subchapter L. (V.T.I.C. Art. 11.21.)
[Sections 882.502-882.550 reserved for expansion]
SUBCHAPTER L. MERGERS AND CONSOLIDATIONS
Sec. 882.551. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a merger or consolidation in which at least one of the parties to the transaction is a mutual life insurance company. (V.T.I.C. Art. 11.20, Sec. 9 (part).)
Sec. 882.552. AUTHORITY TO MERGE OR CONSOLIDATE. A domestic or foreign mutual life insurance company may merge with a domestic or foreign mutual or stock legal reserve life insurance company or consolidate into a new domestic or foreign mutual or stock life insurance company as provided by this subchapter. (V.T.I.C. Art. 11.20, Sec. 1.)
Sec. 882.553. PROPOSED PLAN OF MERGER OR CONSOLIDATION; FILING WITH COMMISSIONER. (a) If the boards of directors of at least two life insurance companies determine by majority vote to merge or consolidate, the boards of directors shall prepare a proposed plan of merger or consolidation. The plan may contain:
(1) a future allocation of divisible surplus; or
(2) any other fair arrangement by which any equitable interests of the mutual life insurance company's policyholders may be adjusted.
(b) The boards of directors shall file the proposed plan with the commissioner for approval. (V.T.I.C. Art. 11.20, Sec. 2.)
Sec. 882.554. HEARING ON PLAN. As soon as practicable after a proposed plan is filed with the commissioner, the commissioner shall hold a hearing to determine whether to approve the plan. (V.T.I.C. Art. 11.20, Sec. 3 (part).)
Sec. 882.555. COMMISSIONER DETERMINATION ON PLAN. (a) As soon as practicable after the commissioner holds a hearing on a proposed plan under Section 882.554, the commissioner shall approve the plan unless the commissioner determines that:
(1) the plan is contrary to law; or
(2) implementation of the plan:
(A) would not be in the best interests of the policyholders of any mutual life insurance company that is a party to the plan; or
(B) would substantially reduce the security of or service to be rendered to policyholders of any mutual insurance company that is a party to the plan, regardless of whether the policyholders reside in this state or elsewhere.
(b) In determining whether to approve a proposed plan, the commissioner may consider all relevant financial or other information, including past, present, and future operations and accumulations of each company that is a party to the plan.
(c) If the commissioner approves the proposed plan, the commissioner shall notify each party to the plan of the approval.
(d) If the commissioner disapproves the proposed plan, the commissioner shall, within a reasonable time after holding a hearing under Section 882.554:
(1) specify in detail each reason for the disapproval; and
(2) notify each party to the plan. (V.T.I.C. Art. 11.20, Sec. 3 (part).)
Sec. 882.556. APPROVAL OF PLAN BY POLICYHOLDERS. (a) As soon as practicable after receiving from the commissioner notice of approval of a proposed plan under Section 882.555, the board of directors of each mutual life insurance company that is a party to the plan shall submit the plan to the policyholders for a vote at an annual or special meeting.
(b) Not later than the 15th day before the date of the meeting, the company shall provide written notice of the meeting to the policyholders as provided by the company's bylaws. The notice must:
(1) be sent to the policyholder's last known address;
(2) state that one of the purposes of the meeting is to vote on the proposed plan; and
(3) be accompanied by a copy of the proposed plan.
(c) At a meeting under Subsection (a), each policyholder:
(1) is entitled to the number of votes as provided by Section 882.155; and
(2) may vote:
(A) in person;
(B) by written proxy; or
(C) by mailed ballot.
(d) A proposed plan is approved by the policyholders on the affirmative vote of at least two-thirds of the votes cast at the meeting. (V.T.I.C. Art. 11.20, Secs. 3 (part), 4, 5 (part).)
Sec. 882.557. DOMESTIC STOCK LIFE INSURANCE COMPANY; APPROVAL OF PLAN BY SHAREHOLDERS. On notice of approval of a proposed plan under Section 882.555, the board of directors of each domestic stock life insurance company that is a party to the plan shall submit the plan for approval to the company's shareholders in the manner provided by Section 824.003. (V.T.I.C. Art. 11.20, Secs. 3 (part), 5(a) (part).)
Sec. 882.558. FOREIGN LIFE INSURANCE COMPANY; APPROVAL OF PLAN BY POLICYHOLDERS OR SHAREHOLDERS. On notice of approval of a proposed plan under Section 882.555, the board of directors of each foreign life insurance company that is a party to the plan shall submit the plan for approval to the company's policyholders or shareholders as provided by the law of the appropriate jurisdiction. (V.T.I.C. Art. 11.20, Secs. 3 (part), 5(a) (part).)
Sec. 882.559. FILING OF AFFIDAVIT OF PLAN APPROVAL; ISSUANCE OF CERTIFICATE OF MERGER OR CONSOLIDATION. (a) On the approval of a proposed plan under Section 882.556, 882.557, or 882.558, the president or a vice president and the secretary or an assistant secretary of each company that is a party to the plan shall execute and file with the department an affidavit stating that the plan has been approved by the policyholders or shareholders of the company as required by this subchapter.
(b) If the department finds that the affidavit complies with law, the commissioner shall:
(1) endorse the affidavit with:
(A) the word "filed"; and
(B) the date of filing;
(2) if the plan is a plan of merger, issue a certificate of merger to the surviving company or the company's representative; and
(3) if the plan is a plan of consolidation, issue a certificate of consolidation to the new company on the issuance of a charter and a certificate of authority to the new company after:
(A) submission of proper articles of incorporation to the commissioner;
(B) approval by the department in accordance with procedures required for the issuance of a new charter; and
(C) submission of proof that the new company has policyholder surplus at least equal to that of the mutual life insurance company that is a party to the consolidation and has the largest surplus. (V.T.I.C. Art. 11.20, Secs. 5(a) (part), (b).)
Sec. 882.560. EFFECTIVE DATE OF MERGER OR CONSOLIDATION. A merger or consolidation takes effect on the later of:
(1) the date of issuance of the certificate of merger or consolidation; or
(2) a date specified in the plan of merger or consolidation. (V.T.I.C. Art. 11.20, Sec. 6.)
Sec. 882.561. ASSUMPTION OF OUTSTANDING INSURANCE POLICIES. (a) On the effective date of a merger or consolidation under this subchapter, a new or surviving life insurance company resulting from the merger or consolidation assumes each insurance policy outstanding against each company that merges or consolidates on the same terms and under the same conditions as if the policy had continued in force through the original company.
(b) The new or surviving insurance company shall implement the terms of the policy.
(c) The new or surviving insurance company is entitled to:
(1) all rights and privileges under the policy; and
(2) all reserves and surplus that accumulated on the policy before the merger or consolidation.
(d) A policyholder of a mutual life insurance company that is a party to a merger or consolidation resulting in a new or surviving stock life insurance company is not entitled to any voting rights in the new or surviving company. (V.T.I.C. Art. 11.20, Sec. 7 (part).)
Sec. 882.562. ASSUMPTION OF LIABILITIES. On the effective date of a merger or consolidation under this subchapter, a new or surviving life insurance company resulting from the merger or consolidation assumes all liabilities of the original companies. (V.T.I.C. Art. 11.20, Sec. 7 (part).)
Sec. 882.563. EFFECT OF MERGER OR CONSOLIDATION ON PROPERTY. On the effective date of a merger or consolidation under this subchapter, the property rights, including any right of recovery, of each company that is a party to the merger or consolidation are transferred to the new or surviving life insurance company resulting from the merger or consolidation without a deed or other transfer. (V.T.I.C. Art. 11.20, Sec. 7 (part).)
Sec. 882.564. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN INVESTMENTS. (a) This section applies to each investment of an affected life insurance company, including an investment in real property, that:
(1) was authorized as a proper asset, as of the date on which the investment was made and under the laws of the state in which the company was organized, for investment of funds of a life insurance company; and
(2) is taken over by the new or surviving company under the terms of the merger or consolidation.
(b) On the effective date of a merger or consolidation of two or more life insurance companies under this subchapter, an investment of the affected companies described by Subsection (a) is a proper asset under the laws of this state of the new or surviving company if the investment is:
(1) approved by the commissioner; and
(2) taken over on terms satisfactory to the commissioner.
(c) A new or surviving company that acquires, under the terms of the merger or consolidation, real property that exceeds the amount of real property permitted by the applicable sections of this code relating to owning or holding real property shall sell or dispose of the excess real property:
(1) within the period specified by those sections; or
(2) within a longer period if the company obtains a certificate from the commissioner:
(A) stating that the interests of the company will materially suffer by the forced sale or other disposition of the real property; and
(B) specifying the longer period for the sale or other disposition of the real property.
(d) This section does not preclude the designation and use of the excess real property as branch offices of the company in accordance with this code. (V.T.I.C. Art. 11.20, Sec. 7 (part).)
Sec. 882.565. EFFECT OF MERGER OR CONSOLIDATION ON DIVISIBLE SURPLUS. (a) This section applies only to a mutual life insurance company that is a new company or the surviving company resulting from a merger or consolidation under this subchapter.
(b) If the divisible surplus of each domestic mutual life insurance company that is a party to a merger or consolidation under this subchapter was available for allocation to policyholders as provided by Subchapter H immediately before the effective date of the merger or consolidation, the divisible surplus remains available to the policyholders of the new or surviving mutual life insurance company resulting from the merger or consolidation as provided by Subchapter H. (V.T.I.C. Art. 11.20, Sec. 7 (part).)
Sec. 882.566. EFFECT ON ANTITRUST LAWS. This subchapter does not affect in any manner the antitrust laws of this state. (V.T.I.C. Art. 11.20, Sec. 8.)
[Sections 882.567-882.600 reserved for expansion]
SUBCHAPTER M. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY
TO STOCK LEGAL RESERVE LIFE INSURANCE COMPANY
Sec. 882.601. AUTHORITY TO CONVERT TO STOCK LEGAL RESERVE LIFE INSURANCE COMPANY; POLICYHOLDER AUTHORIZATION REQUIRED. A mutual life insurance company organized under this chapter may convert to a stock legal reserve life insurance company as provided by this subchapter only if the conversion is approved by the policyholders by a vote of at least two-thirds of the votes cast by the policyholders in person or by proxy at a meeting called for that purpose. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.602. AMENDMENT TO CHARTER OR ARTICLES OF INCORPORATION REQUIRED. If the policyholders of a mutual life insurance company authorize a conversion under Section 882.601, the board of directors and officers of the company shall amend the company's charter or articles of incorporation to comply with the requirements applicable to a stock legal reserve life insurance company under Chapter 841. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.603. CAPITAL AND SURPLUS REQUIREMENTS. (a) The capital and surplus of the converted stock legal reserve life insurance company must be at least equal to the minimum capital and surplus required for the organization of a stock legal reserve life insurance company under Chapter 841.
(b) If a contribution of United States currency is necessary to meet the capital and surplus requirements of this section, the contribution must be made before the effective date of the conversion. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.604. HEARING. (a) After public notice, the commissioner shall hold a hearing on a conversion authorized under Section 882.601.
(b) Any policyholder of the mutual life insurance company that is the subject of the conversion is entitled to appear and be heard at the hearing. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.605. CONVERSION ON COMMISSIONER APPROVAL. A mutual life insurance company is converted to a stock legal reserve life insurance company if:
(1) the company complies with this subchapter; and
(2) after hearing, the conversion is approved by the commissioner. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.606. APPLICABLE LAW AFTER CONVERSION. After a mutual life insurance company is converted to a stock legal reserve life insurance company, the converted company is governed in the same manner as a company organized under Chapter 841. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
Sec. 882.607. OTHER TYPES OF CONVERSION NOT PROHIBITED. This subchapter does not prohibit a mutual life insurance company from converting to a stock legal reserve life insurance company by:
(1) merger or consolidation;
(2) a total direct or assumption reinsurance agreement; or
(3) any other plan or procedure approved by the company's policyholders and the commissioner. (V.T.I.C. Art. 11.01, Sec. 2(c) (part).)
[Sections 882.608-882.650 reserved for expansion]
SUBCHAPTER N. CONVERSION OF CERTAIN MUTUAL ASSESSMENT
COMPANIES OR ASSOCIATIONS TO MUTUAL LIFE INSURANCE COMPANIES
Sec. 882.651. AUTHORITY TO CONVERT. A mutual assessment company or association organized and operating under the laws of this state on May 17, 1943, may convert to a mutual life insurance company as provided by this subchapter. (V.T.I.C. Art. 11.10, Sec. 1 (part).)
Sec. 882.652. VOLUNTARY CONVERSION. The department may not require a mutual assessment company or association to convert to a mutual life insurance company under this subchapter. (V.T.I.C. Art. 11.10, Sec. 2 (part).)
Sec. 882.653. CONVERSION REQUIREMENTS. Except as provided by Section 882.654, a mutual assessment company or association may convert to a mutual life insurance company only if the company or association:
(1) possesses an unencumbered surplus of at least $1.4 million; and
(2) complies with the requirements of this chapter, including the requirements that the company or association execute articles of incorporation and obtain a charter and a certificate of authority. (V.T.I.C. Art. 11.10, Sec. 1 (part).)
Sec. 882.654. EXEMPTION FROM SURPLUS REQUIREMENTS. (a) A mutual assessment company or association is exempt from the surplus requirements of Section 882.653 if the company or association:
(1) possesses an unencumbered surplus of at least $200,000; and
(2) converted to a mutual life insurance company before September 1, 1999.
(b) A mutual assessment company or association that is exempt under Subsection (a) and that was converted on or after September 1, 1989, shall immediately increase its surplus to an amount that satisfies Section 882.653 on:
(1) a change of control of at least 50 percent of the voting securities of the converted company or association; or
(2) if the converted company or association or the holding company that controls the converted company or association, if any, is not controlled by voting securities, a change of at least 50 percent of the ownership of the converted company or association or its holding company.
(c) For purposes of Subsection (b), a transfer of ownership because of death, regardless of whether the decedent died testate or intestate, is not considered a change of control of a converted mutual assessment company or association or its holding company, if ownership is transferred only to one or more individuals, each of whom would have been an heir of the decedent if the decedent had died intestate. (V.T.I.C. Art. 11.10, Sec. 3.)
Sec. 882.655. APPLICABLE LAW AFTER CONVERSION. After a mutual assessment company or association is converted to a mutual life insurance company, the converted company is governed by this chapter. (V.T.I.C. Art. 11.02, Sec. 2 (part); Art. 11.10, Sec. 1 (part).)
[Sections 882.656-882.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT PROVISIONS
Sec. 882.701. APPLICABILITY OF SUBCHAPTER. This subchapter does not apply to a mutual life insurance company organized under this chapter that has a surplus of at least the minimum amount of capital and surplus required of a capital stock company under Sections 841.054, 841.204, 841.205, 841.301, and 841.302. (New.)
Sec. 882.702. INVESTMENT AND DEPOSIT OF FUNDS; CRIMINAL PENALTY. (a) A person commits an offense if the person is an officer or director of a mutual life insurance company and the person knowingly or wilfully violates or assents to the violation of Section 882.252.
(b) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than five years or less than one year. (V.T.I.C. Art. 11.18-1 (part).)
Sec. 882.703. POLICY FORM; REVOCATION OF CERTIFICATE. The department shall revoke the certificate of authority of a mutual life insurance company that issues a policy on a form that has not been approved by the department as required by Section 882.453. (V.T.I.C. Art. 11.13 (part).)
CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN
MUTUAL LIFE INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 883.001. DEFINITION
Sec. 883.002. APPLICABILITY OF CERTAIN GENERAL LAWS
Sec. 883.003. APPLICABILITY OF TEXAS NON-PROFIT
CORPORATION ACT
[Sections 883.004-883.050 reserved for expansion]
SUBCHAPTER B. FORMATION, STRUCTURE, AND MANAGEMENT
OF COMPANY
Sec. 883.051. FORMATION OF COMPANY
Sec. 883.052. ARTICLES OF INCORPORATION
Sec. 883.053. COMPANY'S NAME
Sec. 883.054. LOCATION OF PRINCIPAL OR HOME OFFICE
Sec. 883.055. BEGINNING OF CORPORATE EXISTENCE
Sec. 883.056. BOARD OF DIRECTORS
Sec. 883.057. MEMBERSHIP OF PUBLIC OR PRIVATE ENTITIES IN
COMPANY AUTHORIZED
Sec. 883.058. MEMBERSHIP VOTES
[Sections 883.059-883.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 883.101. MUTUAL INSURANCE BUSINESS
Sec. 883.102. CHARTER AND CERTIFICATE OF AUTHORITY
REQUIRED
Sec. 883.103. AUTHORIZATION OF FOREIGN MUTUAL INSURANCE
COMPANY TO ENGAGE IN BUSINESS
[Sections 883.104-883.150 reserved for expansion]
SUBCHAPTER D. POWERS, DUTIES, AND OPERATION OF COMPANY
Sec. 883.151. AUTHORITY TO WRITE CERTAIN INSURANCE
Sec. 883.152. PRIOR AUTHORITY NOT AFFECTED
Sec. 883.153. POLICY RATES
Sec. 883.154. MAXIMUM PREMIUMS
Sec. 883.155. ISSUANCE OF POLICY FOR CASH PREMIUM ONLY
Sec. 883.156. ASSESSMENT ON POLICYHOLDERS
Sec. 883.157. REINSURANCE OF POLICY
Sec. 883.158. REQUIREMENTS FOR COMPANIES WRITING BONDS
Sec. 883.159. NECESSARY OR INCIDENTAL POWERS
Sec. 883.160. RIGHTS AND PRIVILEGES OF CERTAIN COMPANIES
RETAINED
Sec. 883.161. DIVIDENDS
Sec. 883.162. LOANS TO COMPANY
Sec. 883.163. IMMEDIATE NOTIFICATION WHEN ASSETS ARE
INSUFFICIENT; EXAMINATION
[Sections 883.164-883.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF COMPANY
Sec. 883.201. SURPLUS REQUIREMENTS
Sec. 883.202. REQUIRED DEPOSIT FOR COMPANIES WRITING BONDS
Sec. 883.203. RESERVES
Sec. 883.204. ANNUAL REPORT
Sec. 883.205. EXAMINATION OF FOREIGN MUTUAL INSURANCE COMPANY
Sec. 883.206. FEES
Sec. 883.207. PREMIUM TAX
[Sections 883.208-883.700 reserved for expansion]
SUBCHAPTER O. CRIMINAL PENALTIES
Sec. 883.701. VIOLATION OF CHAPTER
Sec. 883.702. FAILURE TO REPORT CONDITION
Sec. 883.703. FALSE STATEMENT OR MISAPPROPRIATION
Sec. 883.704. UNAUTHORIZED MUTUAL FIRE INSURANCE
CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN
MUTUAL LIFE INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 883.001. DEFINITION. In this chapter, "foreign mutual insurance company" means a mutual insurance company organized under the laws of a jurisdiction other than this state and authorized to engage in the business of insurance on a mutual plan in any state, district, or territory. (V.T.I.C. Art. 15.14 (part); New.)
Sec. 883.002. APPLICABILITY OF CERTAIN GENERAL LAWS. (a) Except as otherwise provided by law, a mutual insurance company and a foreign mutual insurance company organized or operating under this chapter are subject to the laws applicable to:
(1) a stock insurance company engaging in the same kind of insurance;
(2) investments;
(3) valued policies;
(4) policy forms and rates;
(5) reciprocal or retaliatory laws;
(6) insolvency and liquidation; and
(7) publication and defamatory statements.
(b) This chapter does not exempt a mutual insurance company organized under this chapter from being subject to other laws of this state governing the incorporation, organization, regulation, and operation of a company or organization writing insurance in this state. (V.T.I.C. Arts. 15.15 (part), 15.16.)
Sec. 883.003. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. Except to the extent of any conflict with this code, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a mutual insurance company organized under this chapter. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to mutual insurance companies. (V.T.I.C. Art. 15.05-A (part).)
[Sections 883.004-883.050 reserved for expansion]
SUBCHAPTER B. FORMATION, STRUCTURE, AND MANAGEMENT
OF COMPANY
Sec. 883.051. FORMATION OF COMPANY. (a) Twenty or more persons, a majority of whom are residents of this state, may incorporate in accordance with this chapter to engage in the business of mutual insurance as provided by this chapter.
(b) To form a mutual insurance company, each incorporator must sign and acknowledge the articles of incorporation of the company.
(c) The incorporators of a proposed mutual insurance company are subject to Sections 822.001, 822.051, 822.057(a)(1)-(3), (b), and (c), 822.058(a), 822.059, 822.060, and 822.201, except that:
(1) the minimum number of persons required to adopt and sign the proposed company's articles of incorporation under Section 822.051 is equal to the number of the proposed company's incorporators as provided by Subsection (a); and
(2) the unencumbered surplus of the mutual insurance company is capital structure for purposes of Section 822.201. (V.T.I.C. Arts. 15.01, 15.02 (part), 15.04.)
Sec. 883.052. ARTICLES OF INCORPORATION. Articles of incorporation of a proposed mutual insurance company must specify:
(1) the name of the company;
(2) the purpose for which the company is being formed;
(3) the location of the company's principal or home office;
(4) the name and place of residence of each incorporator; and
(5) the name and address of each member of the initial board of directors. (V.T.I.C. Art. 15.02 (part).)
Sec. 883.053. COMPANY'S NAME. (a) The name of a mutual insurance company must contain the word "mutual."
(b) A mutual insurance company's name may not be so similar to the name of any other mutual insurance company organized or engaging in business in the United States, that it is confusing or misleading. (V.T.I.C. Art. 15.03.)
Sec. 883.054. LOCATION OF PRINCIPAL OR HOME OFFICE. The principal or home office of a mutual insurance company must be located in this state. (V.T.I.C. Art. 15.02 (part).)
Sec. 883.055. BEGINNING OF CORPORATE EXISTENCE. The corporate existence of a mutual insurance company begins on the date on which the commissioner issues a certificate of authority to the company. (V.T.I.C. Art. 15.05 (part).)
Sec. 883.056. BOARD OF DIRECTORS. (a) The board of directors named in a mutual insurance company's articles of incorporation shall manage the company until the initial meeting of the members of the company.
(b) After a mutual insurance company is issued a certificate of authority, the company's board of directors may:
(1) adopt bylaws;
(2) accept applications for insurance; and
(3) transact the business of the company. (V.T.I.C. Arts. 15.02 (part), 15.05 (part).)
Sec. 883.057. MEMBERSHIP OF PUBLIC OR PRIVATE ENTITIES IN COMPANY AUTHORIZED. (a) Any public or private corporation, board, association, or estate may make an application for, enter into an agreement for, or hold a policy in a mutual insurance company. An officer, shareholder, trustee, or legal representative may act on behalf of the entity for that participation.
(b) An officer, shareholder, trustee, or legal representative of a public or private entity described by Subsection (a) may not be held personally liable on a contract of insurance executed by the person in the person's capacity as a representative of the entity under Subsection (a).
(c) The right of a corporation organized under the laws of this state to participate as a member of a mutual insurance company is:
(1) incidental to the purpose for which the corporation was organized; and
(2) in addition to the corporate rights or powers expressly conferred in the corporation's articles of incorporation. (V.T.I.C. Art. 15.09.)
Sec. 883.058. MEMBERSHIP VOTES. Each member of a mutual insurance company is entitled to one vote on each matter submitted to a vote unless a different number of votes is authorized by the company's bylaws based on:
(1) the insurance in force;
(2) the number of policies held by the member; or
(3) the amount of the premium paid by the member. (V.T.I.C. Art. 15.10.)
[Sections 883.059-883.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 883.101. MUTUAL INSURANCE BUSINESS. Mutual insurance of any kind may not be written in this state except as authorized by this chapter or any other law. (V.T.I.C. Art. 15.20.)
Sec. 883.102. CHARTER AND CERTIFICATE OF AUTHORITY REQUIRED. A mutual insurance company organized under this chapter may not engage in the business of insurance until:
(1) the company obtains a charter as provided by Chapter 822; and
(2) the commissioner issues to the company a certificate of authority for that purpose. (V.T.I.C. Arts. 15.05 (part), 15.08 (part).)
Sec. 883.103. AUTHORIZATION OF FOREIGN MUTUAL INSURANCE COMPANY TO ENGAGE IN BUSINESS. (a) The department shall authorize a foreign mutual insurance company to write the kinds of insurance authorized by the company's charter or articles of incorporation in this state if the company:
(1) is solvent as determined under this chapter;
(2) files with the department:
(A) a copy of the company's bylaws certified by the company's secretary; and
(B) a certified copy of the company's charter or articles of incorporation;
(3) appoints the commissioner as the company's agent for service of process as provided by Chapter 804;
(4) files a financial statement under oath in a form as required by the department; and
(5) complies with legal requirements applicable to the filing of documents and the furnishing of information by a stock insurance company that files an application with the department for authority to transact the same kind of insurance as the company.
(b) A foreign mutual insurance company's name may not be so similar to a name of a mutual insurance company or foreign mutual insurance company organized or authorized to engage in business in this state that it is confusing or misleading.
(c) A foreign mutual insurance company authorized to engage in the business of insurance under this section has, to the same extent, all of the powers granted to and privileges of a mutual insurance company organized and operating under this chapter. (V.T.I.C. Art. 15.14 (part).)
[Sections 883.104-883.150 reserved for expansion]
SUBCHAPTER D. POWERS, DUTIES, AND OPERATION OF COMPANY
Sec. 883.151. AUTHORITY TO WRITE CERTAIN INSURANCE. A mutual insurance company organized under this chapter may write any kind of insurance that may be lawfully written in this state, other than life insurance. (V.T.I.C. Art. 15.06 (part).)
Sec. 883.152. PRIOR AUTHORITY NOT AFFECTED. This chapter does not affect any authority that existed before September 6, 1955, that allowed mutual insurance companies to write non-assessable policies in this state, subject to any prerequisite imposed by law on that authority. (V.T.I.C. Art. 15.11 (part).)
Sec. 883.153. POLICY RATES. A mutual insurance company operating under this chapter shall charge the insurance rates prescribed by the commissioner and is subject to the same rate requirements as a domestic insurance company. (V.T.I.C. Art. 15.06 (part).)
Sec. 883.154. MAXIMUM PREMIUMS. (a) The maximum premium of an insurance policy issued by a mutual insurance company organized under this chapter must be stated in the policy.
(b) A policy's maximum premium may consist only of:
(1) a cash premium; or
(2) a cash premium and a contingent premium in an amount equal to one additional cash premium. (V.T.I.C. Art. 15.11 (part).)
Sec. 883.155. ISSUANCE OF POLICY FOR CASH PREMIUM ONLY. (a) A mutual insurance company organized under this chapter may not issue an insurance policy for a cash premium only unless:
(1) the company possesses surplus above all liabilities in an amount at least equal to the minimum capital and surplus required of a stock insurance company engaging in the same kinds of insurance;
(2) the company files with the department:
(A) an application for the issuance of this type of policy; and
(B) a certified copy of the resolution of the company's board of directors authorizing the issuance; and
(3) the commissioner approves the documents filed under Subdivision (2).
(b) A mutual insurance company that issues a policy for a cash premium only may waive all contingent premiums in any outstanding policies.
(c) A foreign mutual insurance company authorized to engage in the business of insurance in this state may issue an insurance policy for a cash premium only and may waive contingent premiums on any of its outstanding policies in the same manner and subject to the same requirements as a mutual insurance company under this section that is engaged in the same kinds of insurance. (V.T.I.C. Art. 15.11 (part).)
Sec. 883.156. ASSESSMENT ON POLICYHOLDERS. (a) A policyholder is not liable for an assessment imposed on a policy issued by a mutual insurance company with approval of the commissioner under Section 883.155(a).
(b) An assessment may not be imposed on the holder of a policy described by Section 883.155(a) by:
(1) the officers or directors of a mutual insurance company;
(2) the department;
(3) a receiver; or
(4) a liquidator. (V.T.I.C. Art. 15.11 (part).)
Sec. 883.157. REINSURANCE OF POLICY. (a) Subject to Subsection (c), a mutual insurance company authorized to engage in the business of insurance in this state may enter into an agreement with an insurer to cede to or accept from the insurer all or part of an insurance risk.
(b) A reinsurance agreement under this section does not create or confer contingent liability, participation, or membership unless otherwise provided by the agreement.
(c) A mutual insurance company may not enter into an agreement with a reinsurer that has been disapproved for that purpose by written order of the commissioner filed in the department's offices. (V.T.I.C. Art. 15.17.)
Sec. 883.158. REQUIREMENTS FOR COMPANIES WRITING BONDS. A mutual insurance company qualifying to write bonds under this chapter is subject to the same legal requirements as any other insurance company writing bonds under this chapter. (V.T.I.C. Art. 15.07.)
Sec. 883.159. NECESSARY OR INCIDENTAL POWERS. A mutual insurance company organized under this chapter has such powers as are necessary or incidental to the transaction of its business. (V.T.I.C. Art. 15.05 (part).)
Sec. 883.160. RIGHTS AND PRIVILEGES OF CERTAIN COMPANIES RETAINED. A mutual insurance company engaged in business under Chapters 5, 9, 12, 13, 14, and 15, Title 78, Revised Statutes, before their repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st Called Session, 1929, as amended by Section 1, Chapter 60, Acts of the 41st Legislature, 2nd Called Session, 1929, retains the rights and privileges under the repealed law to the extent provided by those sections. (V.T.I.C. Art. 15.19.)
Sec. 883.161. DIVIDENDS. On advance approval of the commissioner, a mutual insurance company may pay dividends to its members. (V.T.I.C. Art. 15.05-A (part).)
Sec. 883.162. LOANS TO COMPANY. (a) A person, including a director, officer, or member of a mutual insurance company, may loan to the company money necessary:
(1) for the company to engage in the company's business; or
(2) to enable the company to comply with a legal requirement.
(b) The mutual insurance company may repay a loan and agreed interest, at an annual rate not to exceed 20 percent, only from the surplus remaining after the company provides for the company's reserves, other liabilities, and required surplus.
(c) A loan under this section or interest on a loan is not otherwise a liability or claim against the company or any of its assets.
(d) A mutual insurance company may not pay a commission or promotion expense in connection with a loan made to the company.
(e) A mutual insurance company shall report in its annual statement the amount of each loan made to the company. (V.T.I.C. Art. 15.12.)
Sec. 883.163. IMMEDIATE NOTIFICATION WHEN ASSETS ARE INSUFFICIENT; EXAMINATION. The president and the secretary of a mutual insurance company operating under the law providing for the incorporation of mutual fire, lightning, hail, and storm insurance companies shall immediately notify the commissioner any time the admitted assets of the company are less than the largest single risk for which the company is liable. The commissioner may make an examination into the affairs of the company as the commissioner considers best. (V.T.I.C. Art. 15.19-1 (part).)
[Sections 883.164-883.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF COMPANY
Sec. 883.201. SURPLUS REQUIREMENTS. A mutual insurance company organized under this chapter must possess a surplus over and above all liabilities in an amount equal to the minimum capital stock and surplus required of a stock insurance company engaged in the same kinds of insurance. (V.T.I.C. Art. 15.06 (part).)
Sec. 883.202. REQUIRED DEPOSIT FOR COMPANIES WRITING BONDS. (a) A mutual insurance company organized under this chapter that writes fidelity and surety bond coverage shall maintain on deposit with the comptroller cash or securities of the kind described by Article 2.10 in an amount equal to the amount of cash or securities required of a domestic stock insurance company.
(b) The commissioner must approve for deposit the cash or securities required by this section. (V.T.I.C. Art. 15.06 (part).)
Sec. 883.203. RESERVES. (a) A mutual insurance company organized under this chapter shall maintain unearned premiums and other reserves separately for each kind of insurance. The reserves must be maintained on the same basis as those reserves are required to be maintained by a domestic stock insurance company engaging in the same kinds of insurance.
(b) A mutual insurance company operating under this chapter is subject to the same reserve requirements as a domestic insurance company under law. (V.T.I.C. Arts. 15.06 (part), 15.13.)
Sec. 883.204. ANNUAL REPORT. (a) A mutual insurance company and a foreign mutual insurance company organized or operating under this chapter shall submit to the commissioner an annual report in the form required by the commissioner.
(b) To the extent practicable, the commissioner shall adopt a form that is similar to a form that is generally used for submission of the annual report throughout the United States. (V.T.I.C. Art. 15.15 (part).)
Sec. 883.205. EXAMINATION OF FOREIGN MUTUAL INSURANCE COMPANY. To the extent practicable, an examination of a foreign mutual insurance company must be conducted in cooperation with the insurance departments of other states in which the foreign company is authorized to transact business. (V.T.I.C. Art. 15.15 (part).)
Sec. 883.206. FEES. A mutual insurance company and a foreign mutual insurance company organized or operating under this chapter are subject to a fee imposed by law on a stock insurance company engaging in the same kinds of insurance. (V.T.I.C. Art. 15.18 (part).)
Sec. 883.207. PREMIUM TAX. A mutual insurance company and a foreign mutual insurance company organized or operating under this chapter are subject to taxes imposed by law on that company. The company shall pay the tax on the gross premiums received for direct insurance written on property or risks located in this state. The tax payable must be computed on the portion of the gross premiums remaining after deducting:
(1) premiums charged on policies not taken;
(2) premiums returned on canceled policies; and
(3) any refund or other return made to the policyholders other than for the incurrence of a loss. (V.T.I.C. Art. 15.18 (part).)
[Sections 883.208-883.700 reserved for expansion]
SUBCHAPTER O. CRIMINAL PENALTIES
Sec. 883.701. VIOLATION OF CHAPTER. (a) Except as otherwise provided by this subchapter, a person or corporation commits an offense if the person or corporation violates this chapter.
(b) An offense under this section is a misdemeanor punishable by a fine of not less than $50 or more than $500. (V.T.I.C. Art. 15.21.)
Sec. 883.702. FAILURE TO REPORT CONDITION. (a) A person commits an offense if the person is a president or secretary described by Section 883.163 and the person fails to make the report required by that section.
(b) An offense under this section is a misdemeanor punishable by a fine of not less than $100 or more than $500. (V.T.I.C. Art. 15.19-1 (part).)
Sec. 883.703. FALSE STATEMENT OR MISAPPROPRIATION. (a) A person commits an offense if the person intentionally submits a false statement or misappropriates the funds of a mutual insurance company organized under the laws providing for the incorporation of mutual fire, lightning, hail, and storm insurance companies.
(b) An offense under this section is a felony punishable by confinement in the institutional division of the Texas Department of Criminal Justice for not less than 5 years or more than 10 years. (V.T.I.C. Art. 15.19-2.)
Sec. 883.704. UNAUTHORIZED MUTUAL FIRE INSURANCE. (a) A person commits an offense if the person engages in the business of mutual fire insurance in this state in violation of the laws regulating mutual fire insurance.
(b) An offense under this section is a misdemeanor punishable by a fine of not less than $50 or more than $500. (V.T.I.C. Art. 15.20-1.)
CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 884.001. DEFINITION
Sec. 884.002. APPLICABILITY OF OTHER LAW TO COMPANY
Sec. 884.003. ADMITTED ASSETS
[Sections 884.004-884.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF
STIPULATED PREMIUM INSURANCE COMPANY
Sec. 884.051. FORMATION OF COMPANY
Sec. 884.052. ARTICLES OF INCORPORATION
Sec. 884.053. COMPANY'S NAME
Sec. 884.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS
Sec. 884.055. SHARES OF STOCK
Sec. 884.056. APPLICATION FOR CHARTER
Sec. 884.057. ACTION BY COMMISSIONER AND DEPARTMENT AFTER
FILING
Sec. 884.058. APPLICATION PROCESS
Sec. 884.059. ACTION ON APPLICATION
Sec. 884.060. BEGINNING OF CORPORATE EXISTENCE
Sec. 884.061. ORGANIZATIONAL MEETING
[Sections 884.062-884.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 884.101. SCHEDULE OF ASSETS
Sec. 884.102. TEMPORARY CERTIFICATE OF AUTHORITY
Sec. 884.103. REGULAR CERTIFICATE OF AUTHORITY
[Sections 884.104-884.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF STIPULATED PREMIUM COMPANY
Sec. 884.151. CONDUCTING SHAREHOLDERS' MEETING
Sec. 884.152. BOARD OF DIRECTORS
Sec. 884.153. ELECTION OF DIRECTORS
Sec. 884.154. OFFICERS
Sec. 884.155. AMENDMENT OF CHARTER OR ARTICLES
[Sections 884.156-884.200 reserved for expansion]
SUBCHAPTER E. CAPITAL AND SURPLUS
Sec. 884.201. FORM OF CAPITAL AND SURPLUS
Sec. 884.202. INCREASE OR DECREASE OF CAPITAL STOCK
Sec. 884.203. PUBLIC OFFERING OF CAPITAL STOCK
Sec. 884.204. COMPANY'S REPURCHASE OF STOCK
Sec. 884.205. IMPAIRMENT OF CAPITAL STOCK
Sec. 884.206. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND
SURPLUS AMOUNTS
Sec. 884.207. NEW BUSINESS PROHIBITED WHEN CAPITAL
REQUIREMENTS NOT SATISFIED
[Sections 884.208-884.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS AND DUTIES OF STIPULATED
PREMIUM COMPANY
Sec. 884.251. DEPOSIT OF COMPANY'S FUNDS
Sec. 884.252. PAYMENTS TO OFFICERS, DIRECTORS, AND
EMPLOYEES
Sec. 884.253. DIVIDENDS
Sec. 884.254. TRANSFER OF STOCK
Sec. 884.255. USE OF CERTAIN TERMS IN ADVERTISING
Sec. 884.256. ANNUAL STATEMENT; FILING FEE
[Sections 884.257-884.300 reserved for expansion]
SUBCHAPTER G. POWERS AND DUTIES RELATING TO COVERAGES
Sec. 884.301. REINSURANCE OF POLICY
Sec. 884.302. LIMITS ON LIFE INSURANCE
Sec. 884.303. ISSUANCE OF LIFE INSURANCE POLICIES BY
CERTAIN COMPANIES
Sec. 884.304. LIFE INSURANCE OF MORE THAN $15,000
Sec. 884.305. PREMIUMS ON LIFE INSURANCE POLICIES
Sec. 884.306. LIFE INSURANCE CONTRACT
Sec. 884.307. ISSUANCE OF ANNUITY CONTRACT
Sec. 884.308. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH
INSURANCE POLICIES
Sec. 884.309. ADJUSTMENT OF PREMIUMS
Sec. 884.310. AGENT
[Sections 884.311-884.350 reserved for expansion]
SUBCHAPTER H. CONTENTS OF APPLICATIONS AND POLICIES
Sec. 884.351. GENERAL REQUIREMENTS FOR POLICY AND
APPLICATION FORMS
Sec. 884.352. REQUIREMENTS FOR ACCIDENT, HEALTH, AND
HOSPITALIZATION INSURANCE POLICIES
Sec. 884.353. LIFE INSURANCE APPLICATION FORMS
Sec. 884.354. LIFE INSURANCE POLICY FORMS;
INCONTESTABILITY
Sec. 884.355. DESIGNATION OF BENEFICIARIES
Sec. 884.356. LIFE INSURANCE BENEFIT REDUCTIONS OR
INCREASES
Sec. 884.357. FORM APPROVAL
[Sections 884.358-884.400 reserved for expansion]
SUBCHAPTER I. AUTHORITY TO ISSUE OTHER COVERAGE
Sec. 884.401. AUTHORITY CUMULATIVE
Sec. 884.402. ADDITIONAL COVERAGE
Sec. 884.403. POLICY REQUIREMENTS
Sec. 884.404. CAPITAL AND SURPLUS REQUIREMENTS
Sec. 884.405. AGENT; LICENSE
Sec. 884.406. ANNUAL STATEMENT
Sec. 884.407. RELATIONSHIP OF SUBCHAPTER TO OTHER
PROVISIONS OF CHAPTER
Sec. 884.408. IMPLEMENTATION OF SUBCHAPTER
[Sections 884.409-884.450 reserved for expansion]
SUBCHAPTER J. RESERVES
Sec. 884.451. RESERVES ON INDIVIDUAL AND GROUP LIFE
INSURANCE POLICIES
Sec. 884.452. RESERVES ON ACCIDENT AND HEALTH INSURANCE
POLICIES
Sec. 884.453. DEFICIENCY RESERVE
Sec. 884.454. COMMISSIONER'S COMPUTATION OF RESERVE
LIABILITY
Sec. 884.455. REQUIRED SECURITIES
Sec. 884.456. INCREASE OF RESERVES
[Sections 884.457-884.500 reserved for expansion]
SUBCHAPTER K. DIRECT REINSURANCE AGREEMENTS
Sec. 884.501. DIRECT REINSURANCE AGREEMENTS BETWEEN
STIPULATED PREMIUM COMPANIES
Sec. 884.502. DIRECT REINSURANCE AGREEMENT WITH LEGAL
RESERVE COMPANY
Sec. 884.503. DIRECT REINSURANCE OF ACCIDENT OR HEALTH
INSURANCE POLICIES
Sec. 884.504. DIRECT REINSURANCE OF CERTAIN POLICIES
Sec. 884.505. EFFECT OF TOTAL DIRECT REINSURANCE AGREEMENT
Sec. 884.506. ASSUMPTION CERTIFICATE
[Sections 884.507-884.550 reserved for expansion]
SUBCHAPTER L. DIRECT REINSURANCE AGREEMENTS WITH MUTUAL
ASSESSMENT COMPANIES
Sec. 884.551. DEFINITIONS
Sec. 884.552. AUTHORITY TO CONTRACT
Sec. 884.553. REINSURANCE AGREEMENT
Sec. 884.554. APPROVAL BY COMMISSIONER
Sec. 884.555. MEMBERS MEETING; NOTICE
Sec. 884.556. MEMBERS MEETING; PROCEDURES
Sec. 884.557. SUBMISSION OF MEETING FACTS TO DEPARTMENT
Sec. 884.558. EFFECTIVE DATE OF AGREEMENT
Sec. 884.559. ACTION AFTER AGREEMENT RATIFICATION
Sec. 884.560. ASSUMPTION CERTIFICATE
Sec. 884.561. ADJUSTMENT OF LIFE INSURANCE PREMIUMS
Sec. 884.562. APPROVAL OF RATE ADJUSTMENT
[Sections 884.563-884.600 reserved for expansion]
SUBCHAPTER M. CONVERSION TO LEGAL RESERVE COMPANY
Sec. 884.601. AUTHORIZATION TO CONVERT
Sec. 884.602. ASSUMPTION CERTIFICATE
Sec. 884.603. EXEMPTION FROM CAPITAL AND SURPLUS
REQUIREMENTS
[Sections 884.604-884.700 reserved for expansion]
SUBCHAPTER O. SUPERVISORY INTERVENTION; DISSOLUTION
Sec. 884.701. NOTICE OF INSOLVENCY, HAZARD, OR FAILURE TO
COMPLY WITH LAW
Sec. 884.702. COMPLIANCE WITH NOTICE REQUIREMENTS;
CONSEQUENCES OF FAILURE
Sec. 884.703. FAILURE TO COMPLY
Sec. 884.704. COMMISSIONER'S ACTION WHEN COMPANY CANNOT
CONTINUE BUSINESS
Sec. 884.705. ACTION BY ATTORNEY GENERAL
Sec. 884.706. REPORT TO ATTORNEY GENERAL
Sec. 884.707. COST OF CONSERVATOR'S SERVICES
CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 884.001. DEFINITION. In this chapter, "stipulated premium company" means a:
(1) stipulated premium life insurance company;
(2) stipulated premium accident insurance company;
(3) stipulated premium life and accident insurance company;
(4) stipulated premium accident and health insurance company; or
(5) stipulated premium life, accident, and health insurance company. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.002. APPLICABILITY OF OTHER LAW TO COMPANY. (a) Except as expressly provided by this code, a provision of this code, other than this chapter, does not apply to a stipulated premium company organized under this chapter.
(b) A law enacted after August 28, 1961, does not apply to a stipulated premium company unless stipulated premium companies are expressly designated in the law.
(c) The following provisions of this code apply to a stipulated premium company:
(1) Article 1.15;
(2) Article 1.15A;
(3) Article 1.16;
(4) Article 1.19;
(5) Article 1.32;
(6) Article 3.10;
(7) Article 3.39;
(8) Article 3.40;
(9) Article 21.07-7;
(10) Article 21.21;
(11) Article 21.28;
(12) Article 21.32;
(13) Article 21.39;
(14) Article 21.47;
(15) Section 38.001;
(16) Sections 801.001-801.002;
(17) Sections 801.051-801.055;
(18) Section 801.057;
(19) Sections 801.101-801.102;
(20) Subchapter A, Chapter 821;
(21) Chapter 824;
(22) Chapter 828;
(23) Section 841.251;
(24) Section 841.259;
(25) Section 841.261; and
(26) Section 841.703.
(d) The Securities Act (Article 581-1 et seq., Vernon's Texas Civil Statutes) applies to a stipulated premium company.
(e) The Texas Business Corporation Act applies to a stipulated premium company to the extent that law is not inconsistent with an insurance law applicable to a stipulated premium company. The department shall perform a duty imposed by the Texas Business Corporation Act on the office of the secretary of state that is applicable to a stipulated premium company. (V.T.I.C. Art. 22.01, Sec. 2 (part); Art. 22.16; Art. 22.18, Secs. 1, 2.)
Sec. 884.003. ADMITTED ASSETS. A stipulated premium insurer may include among its admitted assets a net asset under Section 841.004. (V.T.I.C. Art. 3.01, Sec. 10(d) (part).)
[Sections 884.004-884.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF
STIPULATED PREMIUM INSURANCE COMPANY
Sec. 884.051. FORMATION OF COMPANY. (a) Five or more, but not more than 35, residents of this state may form a stipulated premium company.
(b) To form a stipulated premium company:
(1) each incorporator must sign and acknowledge the articles of incorporation of the company; and
(2) the incorporators must file the articles of incorporation with the department. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.052. ARTICLES OF INCORPORATION. (a) Articles of incorporation of a stipulated premium company must specify:
(1) the name and place of residence of each incorporator;
(2) the name of the proposed stipulated premium company;
(3) the location of the proposed company's home office;
(4) the kinds of insurance business the proposed company will transact;
(5) the amount of the proposed company's capital stock;
(6) the number of shares of the proposed company's capital stock; and
(7) the period of the proposed company's duration, which may not exceed 500 years.
(b) The incorporators of a stipulated premium company may include other provisions in the articles of incorporation. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.053. COMPANY'S NAME. (a) The name of a stipulated premium company must contain the words "Insurance Company."
(b) A stipulated premium company's name may not be so similar to the name of another insurance company as to likely mislead the public. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A proposed stipulated premium company's capital stock must be in an amount of at least $15,000.
(b) All of the capital stock required by Subsection (a) must be fully subscribed and paid up and delivered to the incorporators before the articles of incorporation are filed.
(c) To be incorporated, a stipulated premium company must possess at the time of incorporation, in addition to its capital, surplus in an amount of at least $7,500. The amount of the surplus is not required to be stated in the company's articles of incorporation.
(d) At the time of incorporation the minimum capital and surplus shall consist only of:
(1) United States currency;
(2) bonds of the United States, this state, or a county or municipality of this state; or
(3) government insured mortgage loans that are authorized by this chapter, with not more than 50 percent of the minimum capital invested in first mortgage real property loans. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.055. SHARES OF STOCK. (a) The shares of stock of a stipulated premium company must have a par value of not less than $1 or more than $100.
(b) A stipulated premium company may issue and dispose of authorized shares for money or an instrument authorized for minimum capital under Section 884.054(d). After the company receives payment for a share of stock, the share is nonassessable.
(c) If all of the shares of stock authorized by the charter or an amendment to the charter are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the stipulated premium company shall file with the department a certificate authenticated by a majority of the directors stating the number of shares issued and the consideration received for those shares. The company shall file the certificate not later than the 90th day after the date of issuance of any of those remaining shares. (V.T.I.C. Art. 22.02.)
Sec. 884.056. APPLICATION FOR CHARTER. (a) To obtain a charter for a stipulated premium company under this chapter, the incorporators must pay a charter fee in an amount determined under Article 4.07 and file with the department:
(1) an application for charter on the form and containing the information prescribed by the commissioner;
(2) the company's articles of incorporation; and
(3) an affidavit made by two or more of the incorporators that states that:
(A) the minimum capital and surplus requirements of Section 884.054 are satisfied;
(B) the capital and surplus is the bona fide property of the company; and
(C) the information in the application and articles of incorporation is true and correct.
(b) The commissioner may require that the incorporators provide at their expense additional evidence of a matter required in the affidavit before the commissioner takes further action on the application for the charter. (V.T.I.C. Art. 22.03, Sec. 1.)
Sec. 884.057. ACTION BY COMMISSIONER AND DEPARTMENT AFTER FILING. (a) After the charter fee is paid and all items required for a charter under Section 884.056 are filed with the department:
(1) the commissioner may set a date for the hearing on the application; and
(2) the department shall make or cause to be made a full and thorough examination of the company before the hearing.
(b) The stipulated premium company shall pay for the examination required under Subsection (a)(2). (V.T.I.C. Art. 22.03, Sec. 2 (part); Art. 22.05 (part).)
Sec. 884.058. APPLICATION PROCESS. (a) The date for a hearing on an application may not be before the 11th or later than the 30th day after the date notice is provided under Subsection (b).
(b) The commissioner shall:
(1) provide written notice of the date of a hearing to:
(A) the person or persons who filed the application; and
(B) any interested party, including any other party who had previously requested a copy of the notice; and
(2) publish, at the expense of the incorporators, a copy of the notice in a newspaper of general circulation in the county in which the stipulated premium company's home office is proposed to be located.
(c) The department shall make a record of the proceedings of a hearing under this section.
(d) An interested party is entitled to oppose or support the granting or denial of the application and may intervene and participate fully and in all respects in any hearing or other proceeding on the application. An intervenor has the rights and privileges of a proper or necessary party in a civil suit in the courts of this state, including the right to be represented by counsel. (V.T.I.C. Art. 22.03, Sec. 2 (part).)
Sec. 884.059. ACTION ON APPLICATION. (a) In considering the application, the commissioner, not later than the 30th day after the date on which a hearing under Section 884.058 is completed, shall determine if:
(1) the minimum capital and surplus required by Section 884.054 are the bona fide property of the stipulated premium company;
(2) the proposed officers, directors, and managing executives of the company have sufficient insurance experience, ability, and standing to make success of the proposed company probable; and
(3) the applicants are acting in good faith.
(b) If the commissioner determines by an affirmative finding any of the issues under Subsection (a) adversely to the applicants, the commissioner shall reject the application in writing, giving the reason for the rejection. An application may not be granted unless it is adequately supported by competent evidence.
(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application and on receipt of a fee in the amount determined under Article 4.07 shall provide to the incorporators a certified copy of the application, articles of incorporation, and submitted affidavit. (V.T.I.C. Art. 22.03, Secs. 2 (part), 3, 4(a) (part).)
Sec. 884.060. BEGINNING OF CORPORATE EXISTENCE. On receipt of the certified copy of documents under Section 884.059(c), the stipulated premium company becomes a body politic and corporate and the incorporators may complete organization of the company under Section 884.061. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
Sec. 884.061. ORGANIZATIONAL MEETING. (a) After receipt of the certified copy of documents under Section 884.059(c), the incorporators shall promptly call a meeting of the stipulated premium company's shareholders. The shareholders shall:
(1) adopt bylaws to govern the company; and
(2) elect the company's initial board of directors.
(b) The directors elected under this section serve until directors are first elected under Section 884.153. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
[Sections 884.062-884.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 884.101. SCHEDULE OF ASSETS. Two or more officers of the stipulated premium company shall execute and file with the department:
(1) a sworn schedule of each of the assets of the company exhibited to the department during the examination under Section 884.057 showing the value of the assets; and
(2) a sworn statement that the assets are bona fide, are the unconditional and unencumbered property of the company, and are worth the amount stated in the schedule. (V.T.I.C. Art. 22.05 (part).)
Sec. 884.102. TEMPORARY CERTIFICATE OF AUTHORITY. (a) If the commissioner makes a determination favorable to the applicants on all issues under Section 884.059(a), the department, on compliance with the requirements of Section 884.101, shall promptly issue to the company a temporary certificate of authority. The temporary certificate must limit the activities of the company solely to negotiating and obtaining a direct reinsurance agreement, as described by Subchapter L, with a company that on August 28, 1961, was chartered and doing business under former Chapter 14 of this code.
(b) A temporary certificate of authority expires on the first anniversary of its date of issuance unless the department renews it for an additional one-year period.
(c) On the expiration of a temporary certificate of authority the incorporators of the stipulated premium company to which the certificate was issued shall promptly surrender the company's charter to the department for cancellation. (V.T.I.C. Art. 22.05 (part).)
Sec. 884.103. REGULAR CERTIFICATE OF AUTHORITY. (a) If a direct reinsurance agreement described by Section 884.102(a) is entered into while the temporary certificate of authority is valid, the department shall promptly issue to the stipulated premium company a regular certificate of authority to transact the business of insurance in this state in accordance with Subchapter L.
(b) The regular certificate of authority shall provide for the kind of insurance business that the stipulated premium company may conduct. If the other party to the agreement conducts the business of life insurance or is a burial association, the stipulated premium company is entitled to write life insurance policies under this chapter. If the other party is permitted under its charter to write accident insurance, health and accident insurance, or life, health, and accident insurance, the stipulated premium company is entitled to write that kind of insurance.
(c) If a stipulated premium company that holds a regular certificate of authority enters into a direct reinsurance agreement with another company engaged in business under Chapter 887 or 888, the stipulated premium company's certificate of authority shall be amended to authorize the writing of any kind of insurance authorized for the other company. (V.T.I.C. Art. 22.05 (part).)
[Sections 884.104-884.150 reserved for expansion]
SUBCHAPTER D. MANAGEMENT OF STIPULATED PREMIUM COMPANY
Sec. 884.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a meeting of a stipulated premium company's shareholders, each shareholder is entitled to one vote for each fully paid share of stock appearing in the shareholder's name on the company's books.
(b) A shareholder may vote in person or by written proxy.
(c) At a shareholders' meeting, a quorum is any number of shareholders whose cumulative stock ownership in the stipulated premium company represents a majority of the company's paid up capital stock. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
Sec. 884.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of the stipulated premium company, as adopted or amended by the shareholders or directors, the board of directors has full management and control of the company.
(b) The board consists of not fewer than five directors.
(c) The directors shall keep a full and correct record of the board's transactions. The shareholders may inspect those records during business hours.
(d) The directors shall fill a vacancy that occurs on the board or in any office of the company.
(e) A majority of the board is a quorum. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
Sec. 884.153. ELECTION OF DIRECTORS. (a) On the second Tuesday of April of each year the shareholders of a stipulated premium company shall meet at the company's home office and shall elect the company's board of directors to serve one-year terms beginning immediately after the election.
(b) If the shareholders do not elect directors at that meeting, the shareholders may elect the directors at a special shareholders' meeting called for that purpose. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
Sec. 884.154. OFFICERS. (a) A stipulated premium company's directors shall choose one of the directors to serve as the company's president.
(b) Other officers of the stipulated premium company shall be chosen in accordance with the bylaws of the company. An officer other than the president is not required to be a director or a shareholder unless such a qualification is required by the company's bylaws.
(c) The duties and compensation of a stipulated premium company's officers are as stated in the company's bylaws. If the bylaws do not state the duties or compensation of the officers, the directors shall establish the duties or compensation. (V.T.I.C. Art. 22.03, Sec. 4(a) (part).)
Sec. 884.155. AMENDMENT OF CHARTER OR ARTICLES. (a) The shareholders of a stipulated premium company by resolution may amend the company's charter or articles of incorporation at any shareholders' meeting.
(b) The amendment and a copy of the resolution certified by the president and secretary of the stipulated premium company shall be filed and recorded in the same manner as the charter.
(c) An amendment of the charter or articles takes effect when it is recorded. (V.T.I.C. Art. 22.03, Sec. 4(b) (part); Art. 22.04, Sec. 1 (part).)
[Sections 884.156-884.200 reserved for expansion]
SUBCHAPTER E. CAPITAL AND SURPLUS
Sec. 884.201. FORM OF CAPITAL AND SURPLUS. After a charter is granted under this chapter, the stipulated premium company:
(1) shall maintain the company's minimum capital at all times in a form described by Section 884.054(d); and
(2) may invest the company's surplus as provided by Article 3.39. (V.T.I.C. Art. 22.01, Sec. 1 (part).)
Sec. 884.202. INCREASE OR DECREASE OF CAPITAL STOCK. (a) At any shareholders' meeting, shareholders of a stipulated premium company whose cumulative stock ownership represents a majority of the capital stock of the company by resolution may increase or decrease the amount of the company's capital stock subject to this section.
(b) Capital stock may be decreased to an amount that is less than $100,000 only to avoid insolvency as provided by Section 884.205 and may never be decreased to an amount that is less than the minimum amount of paid-up stock required by Section 884.054.
(c) Two officers of the stipulated premium company must sign and acknowledge a statement of the increase or decrease. The acknowledged statement and a certified copy of the resolution shall be filed and recorded in the same manner as the charter.
(d) For an increase or decrease of capital stock, the stipulated premium company may require the return of the original certificates evidencing the stock in exchange for new certificates. An issuance of new certificates that results in a transfer of stock is subject to Section 884.254. (V.T.I.C. Art. 22.03, Sec. 4(b) (part); Art. 22.04, Sec. 1 (part).)
Sec. 884.203. PUBLIC OFFERING OF CAPITAL STOCK. A stipulated premium company may not make to the public an offering that is subject to The Securities Act (Article 581-1 et seq., Vernon's Texas Civil Statutes), of any of its capital stock before the company possesses:
(1) capital in an amount of at least $100,000; and
(2) unencumbered surplus in an amount of at least $100,000. (V.T.I.C. Art. 22.18, Sec. 3.)
Sec. 884.204. COMPANY'S REPURCHASE OF STOCK. (a) Subject to Section 884.202, a stipulated premium company may purchase in the name of the company outstanding shares of the company's capital stock as provided by the Texas Business Corporation Act.
(b) A purchase of stock under this section is not considered an investment and does not violate the provisions of this code relating to eligible investments for a stipulated premium company.
(c) A stipulated premium company that purchases stock under this section shall file with the department not later than the 10th day after the date of the purchase a statement that contains the name of each shareholder from whom the shares were purchased and the sum of money paid for those shares. (V.T.I.C. Art. 22.04, Sec. 2.)
Sec. 884.205. IMPAIRMENT OF CAPITAL STOCK. (a) If, when computing the liabilities of a stipulated premium company under this chapter, one-third or more of the company's capital stock becomes impaired, the company shall correct the impairment not later than the 60th day after the date the company becomes subject to this subsection by:
(1) reducing the company's capital stock subject to the limitation provided by Section 884.202(b);
(2) adjusting the premium rate if permitted by policy contract; or
(3) both reducing capital stock and adjusting the premium rate.
(b) If, when computing a stipulated premium company's reserve liability under this chapter, 50 percent or more of the company's capital stock becomes impaired, the commissioner may apply to a court for the appointment of a receiver to wind up the affairs of the company. (V.T.I.C. Art. 22.12 (part).)
Sec. 884.206. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND SURPLUS AMOUNTS. (a) The commissioner by rule may require a stipulated premium company that writes or assumes life insurance, annuity contracts, or accident and health insurance for a risk to one person in an amount that exceeds $10,000 to maintain capital and surplus in amounts that exceed the minimum amounts required by this chapter because of:
(1) the nature and kind of risks the company underwrites or reinsures;
(2) the premium volume of risks the company underwrites or reinsures;
(3) the composition, quality, duration, or liquidity of the company's investment portfolio;
(4) fluctuations in the market value of securities the company holds; or
(5) the adequacy of the company's reserves.
(b) A rule adopted under Subsection (a) must be designed to ensure the financial solvency of a stipulated premium company for the protection of policyholders and may not require that the total admitted assets of a company exceed 106 percent of its total liabilities. (V.T.I.C. Art. 22.13, Secs. 2(e), (f).)
Sec. 884.207. NEW BUSINESS PROHIBITED WHEN CAPITAL REQUIREMENTS NOT SATISFIED. (a) A stipulated premium company may not write new business in this state unless the company possesses the minimum capital required under this chapter.
(b) A stipulated premium company subject to Section 884.205(a) that does not correct the impairment on or before the date provided by that subsection may not write new business in this state after that date until the impairment is corrected. (V.T.I.C. Art. 22.12 (part).)
[Sections 884.208-884.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS AND DUTIES OF STIPULATED
PREMIUM COMPANY
Sec. 884.251. DEPOSIT OF COMPANY'S FUNDS. (a) A director, member of a committee, officer, or clerk of a stipulated premium company who has the duty of handling or investing the company's funds shall deposit or invest those funds in the corporate name of the company.
(b) An individual described by Subsection (a) may not:
(1) borrow the funds of the stipulated premium company;
(2) have an interest in any way in a loan, pledge, security, or property of the company, except as shareholder; or
(3) take or receive for the individual's use a fee, brokerage, commission, gift, or other consideration for, or on account of, a loan made by or on behalf of the company. (V.T.I.C. Art. 22.10.)
Sec. 884.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES. (a) Unless first authorized by a vote of a stipulated premium company's board of directors or a committee of the board that has the duty of authorizing the payment, the company may not pay:
(1) any compensation or emolument to an officer or director of the company; or
(2) compensation or emolument in an amount that exceeds $50,000 in any year to an individual, firm, or corporation that is not an officer or director of the company.
(b) This section does not prevent a stipulated premium company from contracting with its agents for the payment of renewal commissions.
(c) The shareholders of a stipulated premium company may authorize the creation of one or more plans for the payment of pensions, retirement benefits, or group insurance for its officers and employees. The shareholders may delegate to the company's board of directors the power and duty to prepare, effect, finally approve, administer, and amend a plan. (V.T.I.C. Art. 22.09.)
Sec. 884.253. DIVIDENDS. (a) A stipulated premium company may declare or pay a dividend to its shareholders only from the profits made by the company, not including surplus from the sale of stock.
(b) A stipulated premium company may not pay a dividend, other than a stock dividend, unless:
(1) any deficiency reserve under Section 884.453 has been eliminated; and
(2) the capital of the company is maintained in an amount of at least $100,000.
(c) A stipulated premium company that complies with Subsection (b) may pay cash dividends in accordance with Article 21.32. (V.T.I.C. Art. 22.08.)
Sec. 884.254. TRANSFER OF STOCK. (a) A stipulated premium company's shares of stock are transferable on the company's books, in accordance with law and the bylaws of the company, by the owner or the owner's authorized agent.
(b) Each person who becomes a shareholder by a transfer of shares succeeds to all rights of the former holder of those shares, by reason of that ownership. (V.T.I.C. Art. 22.03, Sec. 4(b) (part); Art. 22.04, Sec. 1 (part).)
Sec. 884.255. USE OF CERTAIN TERMS IN ADVERTISING. A stipulated premium company may not use in its advertising or representation of a policy the words "legal reserve company," "stock company," "old line legal reserve company," or words of similar meaning that might lead the public to believe that a policy provides nonforfeiture values. (V.T.I.C. Art. 22.17 (part).)
Sec. 884.256. ANNUAL STATEMENT; FILING FEE. (a) Except as provided by Section 884.406, not later than March 31 of each year a stipulated premium company shall:
(1) prepare a statement showing the condition of the company on December 31 of the preceding year; and
(2) deliver the statement to the department accompanied by a filing fee in the amount determined under Article 4.07.
(b) The statement must be under the oath of two of the stipulated premium company's officers and must show in detail:
(1) the character of the company's assets and liabilities on December 31 of the preceding year;
(2) the amount and character of business transacted and money received during the year and how money was spent during the year;
(3) the number and amount of the company's policies in force on that date; and
(4) the total amount of the company's policies in force on that date.
(c) For purposes of Subsection (b), an insured under a family group policy to which Section 884.451(b) applies is accounted for only if a reserve is required for that insured under that section.
(d) The department shall prescribe the form of the statement.
(e) Fees collected under this section shall be deposited to the credit of the Texas Department of Insurance operating account. Article 1.31A applies to fees collected under this section. (V.T.I.C. Art. 22.06 (part).)
[Sections 884.257-884.300 reserved for expansion]
SUBCHAPTER G. POWERS AND DUTIES RELATING TO COVERAGES
Sec. 884.301. REINSURANCE OF POLICY. (a) A stipulated premium company may reinsure on an individual indemnity policy basis any risk or part of a risk that the company underwrites or assumes.
(b) The reinsurer must be a legal reserve company that:
(1) is authorized to write life, health, and accident insurance in this state; and
(2) has capital and surplus in an amount of at least $200,000.
(c) After reinsuring under Subsection (a), a stipulated premium company may take a credit for the reinsurance against the aggregate reserves required by Subchapter J. (V.T.I.C. Art. 22.07, Sec. 1.)
Sec. 884.302. LIMITS ON LIFE INSURANCE. (a) Until the amount of the surplus of a stipulated premium company is at least $50,000, the company may not insure one life for more than $1,000 in the event of death from natural causes or more than $2,000 in the event of death from accidental causes, unless the company reinsures the amount of coverage greater than that applicable amount under Section 884.301.
(b) Subsection (a) does not apply to a policy of insurance assumed by a stipulated premium company under Subchapter L.
(c) If the amount of the surplus of a stipulated premium company is at least $50,000 but less than $200,000, the company shall reinsure the insurance amount that exceeds $15,000 on a life insurance risk on one life. (V.T.I.C. Art. 22.07, Secs. 2, 3.)
Sec. 884.303. ISSUANCE OF LIFE INSURANCE POLICIES BY CERTAIN COMPANIES. (a) A stipulated premium company that possesses capital and unencumbered surplus in a combined amount of at least $100,000 may issue life insurance policies as authorized for a company operating under Chapter 841.
(b) A stipulated premium company may not insure one life under this section for more than $15,000, except as provided by Section 884.304 or Subchapter I.
(c) A stipulated premium company may issue a policy under this section only on an endowment or limited pay basis.
(d) A stipulated premium company must reserve and reinsure a policy issued under this section as required for a company operating under Chapter 841. (V.T.I.C. Art. 22.23(a).)
Sec. 884.304. LIFE INSURANCE OF MORE THAN $15,000. (a) Except as provided by this section, a stipulated premium company may not assume liability on a life insurance risk on one life in an amount that exceeds $15,000.
(b) If a stipulated premium company assumes a life insurance risk under a life insurance policy, the initial death benefit of $15,000 or less may increase to an amount greater than $15,000 subject to this section.
(c) For each policy year of a policy for which, after issuance, the death benefit exceeds $15,000, the amount of the increase of the death benefit at the end of that policy year from the end of the preceding policy year may not exceed the greater of:
(1) the amount computed using the maximum rate of increase provided by the policy, which rate may not exceed five percent a year, compounded annually; or
(2) the amount computed using the consumer price index for all urban consumers for all items and for all regions of the United States combined, as determined by the United States Department of Labor, Bureau of Labor Statistics, on September 30 of the year preceding the year in which the policy year ends, compounded annually. (V.T.I.C. Art. 22.13, Sec. 1(b).)
Sec. 884.305. PREMIUMS ON LIFE INSURANCE POLICIES. The premiums charged on a life insurance policy issued by a stipulated premium company may not be less than the renewal net premium computed under the reserve standard adopted by the stipulated premium company and approved by the department. (V.T.I.C. Art. 22.11, Sec. 7.)
Sec. 884.306. LIFE INSURANCE CONTRACT. A life insurance policy issued by a stipulated premium company constitutes the entire contract, except that if a copy of the application for the policy is attached to the policy, the policy and application constitute the entire contract. (V.T.I.C. Art. 22.13, Sec. 1(a) (part).)
Sec. 884.307. ISSUANCE OF ANNUITY CONTRACT. (a) A stipulated premium company that possesses capital and unencumbered surplus in a combined amount of at least $100,000 more than all of its liabilities, including contingent liabilities, may issue annuity contracts as authorized by Chapter 3 and Title 7.
(b) The stipulated premium company shall maintain reserves on the contracts in accordance with the statutes governing reserves on equivalent contracts issued by a legal reserve company.
(c) A stipulated premium company that writes annuity contracts under this section shall maintain capital and unencumbered surplus in at least the combined amount required by Subsection (a).
(d) A stipulated premium company that does not comply with Subsection (c) is considered to be insolvent. (V.T.I.C. Art. 22.23(b).)
Sec. 884.308. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE POLICIES. (a) A stipulated premium company may not assume liability on or indemnify one person for any risk under one or more accident, health, or hospitalization insurance policies, or any combination of those policies in an amount that exceeds $10,000, unless the amount of the issued, outstanding, and stated capital of the company is at least $700,000.
(b) A stipulated premium company that before January 1, 2002, ceases to assume liability on, or indemnify any risk under a policy described by Subsection (a) in the amount specified by Subsection (a), and notifies the commissioner of that action is exempt from the requirements of Subsection (a) until the date the company resumes writing those policies. A company that resumes assuming liability on or indemnifying risks under these policies shall comply with Subsections (a) and (c). For purposes of this subsection, renewal of a policy is not considered to be writing a policy.
(c) A stipulated premium company that is exempt under Subsection (b) shall maintain its issued, outstanding, and stated capital in an amount that is at least:
(1) $100,000, if the last date that the company writes a policy described by Subsection (a) is before January 1, 1993;
(2) $160,000, if the last date that the company writes a policy described by Subsection (a) is during 1993;
(3) $220,000, if the last date that the company writes a policy described by Subsection (a) is during 1994;
(4) $280,000, if the last date that the company writes a policy described by Subsection (a) is during 1995;
(5) $340,000, if the last date that the company writes a policy described by Subsection (a) is during 1996;
(6) $400,000, if the last date that the company writes a policy described by Subsection (a) is during 1997;
(7) $460,000, if the last date that the company writes a policy described by Subsection (a) is during 1998;
(8) $520,000, if the last date that the company writes a policy described by Subsection (a) is during 1999;
(9) $580,000, if the last date that the company writes a policy described by Subsection (a) is during 2000; and
(10) $640,000, if the last date that the company writes a policy described by Subsection (a) is during 2001. (V.T.I.C. Art. 22.13, Secs. 2(d), (g).)
Sec. 884.309. ADJUSTMENT OF PREMIUMS. (a) The board of directors of a stipulated premium company by resolution may, subject to this chapter, increase or otherwise adjust a rate of premium on any insurance policy it issues, reinsures, or assumes when, in the board's discretion, the adjustment is necessary.
(b) In making a comprehensive adjustment of one or more classes of the stipulated premium company's policies, the board of directors may provide that an insured who is required to pay an increased premium may choose to pay a part or none of the amount of the increase and receive a reduction of the corresponding insurance benefits proportionate to the value of the unpaid part of the increase.
(c) This section does not apply to a policy:
(1) issued by a stipulated premium company that on the date the policy is issued possesses an unencumbered surplus in an amount of at least $50,000;
(2) on which the stipulated premium company has relinquished the right to adjust rates; and
(3) under which the premium for life insurance requires the payment of a premium for life insurance that alone is sufficient to maintain reserves at least equal to those computed on the basis of the 1958 Commissioners Standard Ordinary Table of Mortality with interest not to exceed 3-1/2 percent a year. (V.T.I.C. Art. 22.13, Sec. 3 (part).)
Sec. 884.310. AGENT. Each agent of a stipulated premium company must be licensed under Article 21.07. (V.T.I.C. Art. 22.14.)
[Sections 884.311-884.350 reserved for expansion]
SUBCHAPTER H. CONTENTS OF APPLICATIONS AND POLICIES
Sec. 884.351. GENERAL REQUIREMENTS FOR POLICY AND APPLICATION FORMS. (a) Each stipulated premium company policy or application form must contain on its face immediately after the name of the company "A Stipulated Premium Company."
(b) A stipulated premium company shall provide for an adjustment of the premium rate on the insurance contract in each insurance policy it issues, reinsures, or assumes that is subject to a premium adjustment under Section 884.309. Each policy subject to a premium adjustment under that section must contain on the front of the policy a statement that the premium is subject to readjustment.
(c) A stipulated premium company's policy of insurance may not contain "Approved by the Commissioner of Insurance" or words of a similar meaning.
(d) A life insurance policy issued by a stipulated premium company or an application for the policy may not contain language or be in a form that misleads the policyholder or applicant about the kind of insurance offered or the rights or benefits of the policyholder or applicant. (V.T.I.C. Art. 22.13, Secs. 1(a) (part), 3 (part), 6; Art. 22.17 (part).)
Sec. 884.352. REQUIREMENTS FOR ACCIDENT, HEALTH, AND HOSPITALIZATION INSURANCE POLICIES. An accident, health, or hospitalization insurance policy issued, reinsured, or assumed by a stipulated premium company must contain a premium redetermination clause that permits the company's board of directors to adjust the premium rate. (V.T.I.C. Art. 22.13, Sec. 2(b).)
Sec. 884.353. LIFE INSURANCE APPLICATION FORMS. (a) An application for a life insurance policy issued by a stipulated premium company must be signed by the applicant. If the applicant is a minor, the application may be signed by a parent or guardian.
(b) The application for a policy that provides that a misstatement relating to the applicant's health or physical condition may void the policy within the contestable period must state that provision in language approved by the department. The statement must be in not less than 10-point type.
(c) In the absence of fraud each statement in an application is regarded as a representation and not a warranty. (V.T.I.C. Art. 22.13, Sec. 1(a) (part).)
Sec. 884.354. LIFE INSURANCE POLICY FORMS; INCONTESTABILITY. (a) Each life insurance policy issued by a stipulated premium company must state on the front page:
(1) the amount of death benefit to be paid; and
(2) the circumstances or conditions under which the benefit is to be paid.
(b) Each condition of a life insurance policy must be stated in the policy.
(c) A life insurance policy must provide that a policy in force for two years becomes incontestable, except for nonpayment of premiums, on the second anniversary of the date of issuance, if the insured does not die before that date.
(d) A life insurance policy must provide that if the age of the insured is misstated, the amount of insurance is the amount that the premium paid would have purchased if the age had been stated correctly, based on premium rates in effect when the insured dies. (V.T.I.C. Art. 22.13, Sec. 1(a) (part).)
Sec. 884.355. DESIGNATION OF BENEFICIARIES. The designation of a beneficiary under a life insurance policy issued by a stipulated premium company must comply with Subchapter B, Chapter 1103, and Subchapter A, Chapter 1104. (V.T.I.C. Art. 22.13, Sec. 4.)
Sec. 884.356. LIFE INSURANCE BENEFIT REDUCTIONS OR INCREASES. (a) A life insurance policy may provide for reduced benefits if the insured:
(1) dies or is injured while engaged in:
(A) military, naval, or aerial service or aerial flight during peace or war; or
(B) a hazardous occupation specified in the policy; or
(2) dies by the insured's own hand, regardless of whether the insured is sane or insane.
(b) The front page of a life insurance policy must call attention to any reduction or exclusion of benefits provided by the policy. The circumstances or conditions under which the reduction or exclusion applies must be stated plainly in the policy.
(c) If a policy that provides natural death benefits contains a provision for reducing the greatest death benefit provided by the policy for a specified insured for a reason other than a reason specified by Subsection (a):
(1) the reduced death benefit for the insured must at all times when the reduction is in effect equal or exceed 120 percent of the total premium paid on that policy by the insured; and
(2) the reduction must end before the fifth anniversary of the date the policy is issued.
(d) Subsection (c) does not apply to a life insurance policy on which the reduction of the death benefit does not apply at the time of the death of the insured.
(e) If a life insurance policy provides for an increase of the initial amount of the death benefit for a specified insured one or more times during the first five years of the policy, the amount of death benefit for the insured must at all times during the period of the increasing benefit equal at least 120 percent of the premiums paid on that policy by the insured during the period of the increase.
(f) Subsection (e) does not apply to a life insurance policy that has been in force for more than five years from the date the policy is issued.
(g) This section does not apply to a family group life insurance policy described by Section 884.451(b). (V.T.I.C. Art. 22.13, Sec. 5.)
Sec. 884.357. FORM APPROVAL. The approval of a form of an insurance policy issued by a stipulated premium company is governed by Article 3.42. (V.T.I.C. Art. 22.13, Secs. 1(c), 2(c).)
[Sections 884.358-884.400 reserved for expansion]
SUBCHAPTER I. AUTHORITY TO ISSUE OTHER COVERAGE
Sec. 884.401. AUTHORITY CUMULATIVE. The authority provided by this subchapter is in addition to the authority provided by this chapter for the issuance of other insurance coverage. (V.T.I.C. Art. 22.23A, Sec. 1 (part).)
Sec. 884.402. ADDITIONAL COVERAGE. A stipulated premium company that, at the time it begins to issue coverages under this subchapter, possesses the amounts of capital and unencumbered surplus equal to or greater than the corresponding amounts required for organization of a life and health company under Sections 841.052, 841.054, 841.204, 841.205, 841.301, and 841.302 may, subject to Section 884.403:
(1) issue any kind of life insurance coverage authorized by Chapter 3 or Title 7;
(2) issue any kind of health or accident insurance coverage authorized by Chapter 3; or
(3) issue life insurance coverage through policies without cash surrender values or nonforfeiture values and that exceed $10,000 on one life. (V.T.I.C. Art. 22.23A, Sec. 1 (part).)
Sec. 884.403. POLICY REQUIREMENTS. (a) A policy issued under Section 884.402(1) or (2) must be reserved and must comply with the law, including rules, applicable to a policy issued by a company authorized to engage in or engaging in the business of insurance under Chapter 841.
(b) A policy of life insurance issued under Section 884.402(3):
(1) must be reserved in accordance with a reserve table adopted by the department as appropriate for that type of policy;
(2) must contain:
(A) on its first page, a notice that the policy does not provide cash surrender values or other paid up nonforfeiture benefits or loan values; and
(B) provisions for a grace period for the payment of each premium after the first payment during which the policy remains in force; and
(3) may not be approved until the commissioner has adopted the standard of valuation, including an appropriate mortality table and interest rate. (V.T.I.C. Art. 22.23A, Secs. 1(a) (part), (b) (part).)
Sec. 884.404. CAPITAL AND SURPLUS REQUIREMENTS. (a) A stipulated premium company that issues any insurance coverage under this subchapter shall maintain at all times the capital and unencumbered surplus required when the stipulated premium company began writing the coverage.
(b) A stipulated premium company that does not comply with this section is considered to be impaired unless it reinsures all insurance coverages written under this subchapter with a company that:
(1) is authorized to engage in the business of insurance in this state under this chapter or Chapter 841 or 882 or is an accident insurance company, health insurance company, or life insurance company authorized to engage in the business of insurance in this state under Chapter 982, as appropriate; and
(2) complies with the requirements prescribed by this subchapter. (V.T.I.C. Art. 22.23A, Sec. 2.)
Sec. 884.405. AGENT; LICENSE. (a) An agent may not solicit or write any coverage authorized by this subchapter unless the agent:
(1) holds a license issued under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code); and
(2) is appointed by the stipulated premium company for which the agent is soliciting and writing coverage under this subchapter.
(b) The commissioner may issue under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code), a license for an agent to solicit and write any coverage authorized by this subchapter for a stipulated premium company. Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code), applies to the stipulated premium company as if the company were a legal reserve life insurance company. (V.T.I.C. Art. 22.23A, Secs. 3, 4.)
Sec. 884.406. ANNUAL STATEMENT. A stipulated premium company that issues or maintains in force policies under this subchapter shall file the annual statement required by Section 884.256 not later than March 1 of each year. (V.T.I.C. Art. 22.23A, Sec. 5.)
Sec. 884.407. RELATIONSHIP OF SUBCHAPTER TO OTHER PROVISIONS OF CHAPTER. (a) Section 884.305 and Subchapter J do not apply to a policy issued under this subchapter.
(b) The provisions of Sections 884.309 and 884.351 relating to the adjustment of premiums do not apply to a life insurance policy issued under this subchapter.
(c) The department may not consider losses sustained by a stipulated premium company on a policy issued under this subchapter when applying Section 884.206 or 884.308 to the company's life insurance policies not issued under this subchapter. (V.T.I.C. Art. 22.23A, Sec. 7.)
Sec. 884.408. IMPLEMENTATION OF SUBCHAPTER. The commissioner shall adopt reasonable rules to implement this subchapter, including:
(1) rules adopting mortality and reserving tables required by Sections 884.403(b)(1) and (3); and
(2) reasonable and necessary rules for the content, form, and style of the notice and terms of the grace period required under Section 884.403(b)(2). (V.T.I.C. Art. 22.23A, Sec. 8.)
[Sections 884.409-884.450 reserved for expansion]
SUBCHAPTER J. RESERVES
Sec. 884.451. RESERVES ON INDIVIDUAL AND GROUP LIFE INSURANCE POLICIES. (a) A stipulated premium company shall maintain reserves on each of its individual life insurance policies in accordance with the reserve standard adopted by the company and approved by the department. The standard must provide reserves that in the aggregate are equal to at least the reserve amounts computed using the 1956 Chamberlain Reserve Table with interest that does not exceed 3-1/2 percent per year. A stipulated premium company may use the 1956 Chamberlain Reserve Table.
(b) A stipulated premium company shall maintain reserves on family group life insurance policies on which a group premium is charged and under which the amount of a benefit depends on the sequence of deaths. The amount of the reserves must be equal to the reserves that would be required under Subsection (a) on individual life insurance policies on the lives of:
(1) the two oldest living members of the family group, with the amount of insurance for those two members determined assuming that the elder of the two will die first; or
(2) the living members of the family group, with the amount of insurance for each member of the family group determined assuming that each member will die first.
(c) A stipulated premium company may select the method to be used to compute the amount of the reserves under Subsection (b). (V.T.I.C. Art. 22.11, Sec. 1.)
Sec. 884.452. RESERVES ON ACCIDENT AND HEALTH INSURANCE POLICIES. A stipulated premium company shall maintain reserves on each accident and health insurance policy issued by the company in the manner required of a company authorized to issue that type of policy under Chapter 841. (V.T.I.C. Art. 22.11, Sec. 2 (part).)
Sec. 884.453. DEFICIENCY RESERVE. (a) On the effective date of a direct reinsurance agreement under Subchapter L, the stipulated premium company shall compute:
(1) the amount of the reserves required under this chapter on the policies assumed under the agreement; and
(2) the amount of the net assets transferred to the stipulated premium company under the agreement.
(b) If the amount of the net assets transferred is not equal to the amount of the required reserve, the difference shall be designated and carried as a deficiency reserve. The deficiency reserve does not create insolvency of the stipulated premium company if the company, beginning with the first calendar year that begins after the effective date of the direct reinsurance agreement, reduces the computed deficiency amount, including interest at the assumed rate, by at least 10 percent during each year as computed on December 31 of that year. The reduction must result in the deficiency reserve being eliminated on December 31 of the year for which the 11th annual statement is filed after the company enters into the direct reinsurance agreement. The required reduction in the deficiency reserve may not exceed the cumulative aggregate amount of 10 percent a year.
(c) If in any year a stipulated premium company has not reduced its deficiency reserve as required by Subsection (b), the company's board of directors by appropriate action shall increase premium rates by advancing the age of each insured at the date the insured's policy is issued or otherwise equitably adjust premium rates to correct that failure. The board shall take that action not later than the 30th day after the date the reserves are computed.
(d) If the board does not comply with Subsection (c), the stipulated premium company is considered to be insolvent for purposes of this chapter. (V.T.I.C. Art. 22.11, Sec. 3.)
Sec. 884.454. COMMISSIONER'S COMPUTATION OF RESERVE LIABILITY. (a) As soon as practical each year, the department shall compute the reserve liability of each stipulated premium company that has outstanding insurance policies.
(b) To make the computations, the department:
(1) shall use the net premium basis in accordance with the reserve table and interest rate adopted by the stipulated premium company and approved by the commissioner; and
(2) may use group methods and approximate averages for fractions of a year.
(c) The reserve liability may be computed on not more than a one-year preliminary term with allowance for any deficiency reserve under Section 884.453. (V.T.I.C. Art. 22.11, Sec. 4.)
Sec. 884.455. REQUIRED SECURITIES. The commissioner shall require that a stipulated premium company have securities of the class and character required by Article 3.39 in the amount of the reserve liability computed for the company under Section 884.454 less any deficiency reserve under Section 884.453 after all the debts and claims against the company and the minimum capital required by this chapter have been applied. (V.T.I.C. Art. 22.11, Sec. 5.)
Sec. 884.456. INCREASE OF RESERVES. (a) If a stipulated premium company does not have the reserves required by this subchapter and the minimum capital required under this chapter, the company's board of directors by appropriate action shall increase premium rates on policies in force by advancing the age of each insured at the date the insured's policy is issued or otherwise equitably adjust premium rates to correct the reserve inadequacy. The board shall take that action not later than the 30th day after the date the reserves are computed.
(b) If the board of directors does not comply with Subsection (a), the stipulated premium company is treated as if the company had not corrected an impairment under Section 884.205(a). (V.T.I.C. Art. 22.11, Sec. 6.)
[Sections 884.457-884.500 reserved for expansion]
SUBCHAPTER K. DIRECT REINSURANCE AGREEMENTS
Sec. 884.501. DIRECT REINSURANCE AGREEMENTS BETWEEN STIPULATED PREMIUM COMPANIES. (a) Stipulated premium companies organized under this chapter may enter into a total or partial direct reinsurance agreement if the company assuming the policies under the agreement is authorized to transact the kinds of insurance provided by those policies.
(b) Before a stipulated premium company may enter into a total direct reinsurance agreement:
(1) the company must submit the agreement to the department; and
(2) the department must approve the agreement as fully protecting the interests of all the holders of policies being assumed.
(c) A partial direct reinsurance agreement shall be filed with the department before the effective date of the agreement. (V.T.I.C. Art. 22.19, Secs. 1, 4 (part).)
Sec. 884.502. DIRECT REINSURANCE AGREEMENT WITH LEGAL RESERVE COMPANY. (a) A stipulated premium company may enter into a total or partial direct reinsurance agreement with a legal reserve life insurance company authorized to engage in the business of insurance in this state.
(b) Before a reinsurance agreement under this section may take effect, it must be:
(1) approved by a majority vote of the board of directors of each company;
(2) submitted to the department; and
(3) approved by the department as complying with Section 884.503 or 884.504, as applicable. (V.T.I.C. Art. 22.19, Sec. 2 (part).)
Sec. 884.503. DIRECT REINSURANCE OF ACCIDENT OR HEALTH INSURANCE POLICIES. (a) In the direct reinsurance of a stipulated premium accident or health insurance policy under Section 884.502, the company assuming the policy under the agreement must assume the exact obligations of the policy.
(b) If a policy is non-cancellable or guaranteed renewable, the assuming company may include in the assumption certificate a premium redetermination clause instead of the clause required by Section 884.352. (V.T.I.C. Art. 22.19, Sec. 2 (part).)
Sec. 884.504. DIRECT REINSURANCE OF CERTAIN POLICIES. (a) A reinsurance agreement authorized by Section 884.502 for the direct reinsurance of life insurance policies or a combination of life and accident or health insurance policies must contain provisions that comply with this section.
(b) If the legal reserve life insurance company is the reinsurer and issues an assumption certificate providing whole life coverage for the life benefit, the policyholder is not entitled to receive the policyholder's individual reserve in cash by surrendering the assumption certificate.
(c) If the reserves and premium under the stipulated premium policy are inadequate to provide whole life coverage under the legal reserve assumption certificate and a term coverage assumption is made available, each affected policyholder must be allowed to select:
(1) payment in cash of the amount of the individual reserve, reduced by the deficiency reserve, if any, to the policyholder on surrender of the policy;
(2) an assumption certificate of another stipulated premium company engaging in the business of insurance under this chapter; or
(3) the legal reserve life insurance company's assumption certificate for term coverage that is renewable for the life of the insured without evidence of insurability and the rate for which is based on the legal reserve table selected by the assuming company at the attained age of the insured on the date of the renewal increased by an appropriate expense factor.
(d) To exercise the option described by Subsection (c)(1) the policyholder must request that option not later than the 60th day after the date that the notice of the options available to the policyholder is mailed. A policyholder is entitled to exercise the option under Subsection (c)(2) or (3) not later than the 60th day after the date the assumption certificate of the legal reserve life insurance company is mailed to the policyholder.
(e) If the legal reserve life insurance company makes term coverage available, the company shall use each policyholder's individual reserve, less the amount of the deficiency, if any, as:
(1) a reserve credit to permit the legal reserve assumption certificate to be backdated to the earliest date the reserve credit allows; or
(2) an annuity to reduce the required premium during the initial period of the term coverage. (V.T.I.C. Art. 22.19, Sec. 2 (part).)
Sec. 884.505. EFFECT OF TOTAL DIRECT REINSURANCE AGREEMENT. (a) A stipulated premium company that enters into a total direct reinsurance agreement under Section 884.501 or 884.502 under which it is the ceding company shall promptly surrender its certificate of authority to the department.
(b) The stipulated premium company's shareholders and board of directors shall effect the company's dissolution. (V.T.I.C. Art. 22.19, Sec. 3.)
Sec. 884.506. ASSUMPTION CERTIFICATE. The company assuming a policy under a partial direct reinsurance agreement shall issue to the holder of the assumed policy an assumption certificate to be attached to the policy. (V.T.I.C. Art. 22.19, Sec. 4 (part).)
[Sections 884.507-884.550 reserved for expansion]
SUBCHAPTER L. DIRECT REINSURANCE AGREEMENTS WITH MUTUAL
ASSESSMENT COMPANIES
Sec. 884.551. DEFINITIONS. In this subchapter:
(1) "Mutual assessment company" means any entity regulated under Chapter 887 or 888.
(2) "Net assets" means a company's funds that are available for the payment of the company's obligations in this state, including uncollected premiums that are not more than three months past due, after the deduction of all unpaid losses and claims, claims for losses, and all other debts. (V.T.I.C. Art. 22.15, Secs. 1 (part), 10.)
Sec. 884.552. AUTHORITY TO CONTRACT. A mutual assessment company may enter into a direct reinsurance agreement with a stipulated premium company in accordance with this subchapter. (V.T.I.C. Art. 22.15, Sec. 1 (part).)
Sec. 884.553. REINSURANCE AGREEMENT. (a) A reinsurance agreement under this subchapter must provide that the stipulated premium company is to assume the policies of the mutual assessment company.
(b) The reinsurance agreement must provide for the computation, on the effective date of the agreement, of:
(1) the amount of the net assets, including mortuary and expense funds, of the mutual assessment company that is to be transferred to the stipulated premium company after the payment of all liabilities;
(2) the amount of the required reserves to be established under the reserve and interest table used in the agreement; and
(3) the amount of any deficiency reserve resulting from the computation of Subdivisions (1) and (2).
(c) The deficiency reserve is subject to Section 884.453, except that instead of reducing the deficiency as required by that section, the reinsurance agreement may provide for immediate premium rate adjustments, in accordance with accepted actuarial practices and standards, to eliminate the deficiency at the time of reinsurance or during the period allowed for eliminating the deficiency under Section 884.453.
(d) For purposes of computing the reserves of members of a mutual assessment company, the total net assets of the company shall be apportioned among the members assessed. The percentage of the total amount of the net assets allotted to a member is computed by dividing the amount of the required reserve for that member insured under the reinsurance agreement by the total amount of the required reserve for all members under the agreement.
(e) The reinsurance agreement must provide that each policyholder who is dissatisfied with the agreement and who does not want to accept the assumption certificate offered by the stipulated premium company is entitled to receive the amount of the reserve under the policyholder's policy reduced by the amount of any deficiency reserve applicable to the policy. The policyholder must make a written request for that option to the stipulated premium company not later than the 60th day after the date the assumption certificate is mailed. (V.T.I.C. Art. 22.15, Sec. 6 (part).)
Sec. 884.554. APPROVAL BY COMMISSIONER. (a) A mutual assessment company's board of directors may determine by a majority vote to submit a proposed direct reinsurance agreement to the members of the company. Before the agreement may be submitted to the members, the board must prepare detailed plans for the reinsurance and must submit the agreement to the commissioner.
(b) If the commissioner determines that the proposed direct reinsurance agreement complies with this chapter, the commissioner shall approve the agreement for submission to the members of the company. (V.T.I.C. Art. 22.15, Sec. 2.)
Sec. 884.555. MEMBERS MEETING; NOTICE. (a) After the department approves a proposed direct reinsurance agreement, the board of directors of the mutual assessment company shall:
(1) call a meeting of the company's members in accordance with the company's bylaws for voting on ratification of the direct reinsurance agreement; and
(2) mail to each member:
(A) a copy of the proposed agreement; and
(B) a copy of the notice of the meeting.
(b) The meeting may not be held before the 16th day after the date on which the copies are mailed under Subsection (a)(2). (V.T.I.C. Art. 22.15, Secs. 3, 4 (part).)
Sec. 884.556. MEMBERS MEETING; PROCEDURES. (a) In a meeting called under Section 884.555, a member may vote in person, by proxy to whomever the member designates, or by mail.
(b) All votes must be cast by ballot. A two-thirds vote of the members participating in the election is required to ratify the reinsurance agreement.
(c) The person presiding at the meeting shall supervise and direct the procedure of the meeting and shall appoint an adequate number of inspectors to conduct the voting at the meeting.
(d) The inspectors may determine all questions concerning the qualifications of the voters and the verification, canvassing, and validity of the ballots.
(e) At the conclusion of the meeting, the inspectors shall certify under oath the result of the election to the department and to the stipulated premium company that is a party to the proposed agreement. (V.T.I.C. Art. 22.15, Sec. 4 (part).)
Sec. 884.557. SUBMISSION OF MEETING FACTS TO DEPARTMENT. Not later than the 90th day after the date of the meeting of the members, all facts relating to the meeting, including the accounting of the meeting and the computation of the required reserves, shall be submitted under oath to the department. (V.T.I.C. Art. 22.15, Sec. 7.)
Sec. 884.558. EFFECTIVE DATE OF AGREEMENT. A direct reinsurance agreement that is ratified under Section 884.556 takes effect on the date specified in the agreement. (V.T.I.C. Art. 22.15, Sec. 8.)
Sec. 884.559. ACTION AFTER AGREEMENT RATIFICATION. (a) After ratification of the reinsurance agreement under Section 884.556, the mutual assessment company shall cease doing business and shall transfer all of its assets to the assuming stipulated premium company.
(b) The stipulated premium company shall assume:
(1) all policy liability in accordance with the reinsurance agreement; and
(2) all other liabilities in accordance with the method of payment of those liabilities.
(c) On transfer of a mutual assessment company's assets:
(1) the company shall promptly surrender its certificate of authority and charter to the department; and
(2) the company's corporate existence ceases. (V.T.I.C. Art. 22.15, Sec. 5.)
Sec. 884.560. ASSUMPTION CERTIFICATE. Immediately after ratification of the reinsurance agreement under Section 884.556, the stipulated premium company shall issue to each member of the mutual assessment company an assumption certificate that states:
(1) the terms of the assumption; and
(2) the reserve and interest table under which the policy is assumed. (V.T.I.C. Art. 22.15, Sec. 6 (part).)
Sec. 884.561. ADJUSTMENT OF LIFE INSURANCE PREMIUMS. (a) If the premium charged on a life insurance policy assumed by the stipulated premium company is less than the renewal net premium computed under the reserve standard adopted in the reinsurance agreement, the stipulated premium company shall adjust the premium rate to provide an amount that is at least equal to the renewal net premium based on the age of the insured on the date the policy was issued by the mutual assessment company.
(b) Notwithstanding Subsection (a), if the gross premium charged on a family group policy reinsured by a stipulated premium company is less than the renewal net premium for that policy, the stipulated premium company may choose to not adjust the rate if:
(1) the deficiency reserve of the business of the mutual assessment company is less than 25 percent of the required reserve on the business to be reinsured, including the deficiency premium reserve required by Subdivision (3);
(2) at the time of reinsurance, the gross premium of all family group policies to be reinsured by the stipulated premium company is in the aggregate equal to at least 120 percent of the required net premiums on those family group policies; and
(3) the stipulated premium company maintains on that policy, in addition to any other reserve required by law, a deficiency premium reserve that is equal to the present value, computed using the reserve standard adopted in the reinsurance agreement, of an annuity, the amount of which is equal to the difference between the premium charged and that net premium and the term of which in years is equal to the number of annual premiums for the remainder of the premium paying period.
(c) The deficiency premium reserve required by Subsection (b)(3) is a part of the company's deficiency reserve and shall be reduced in the manner provided by Section 884.453. (V.T.I.C. Art. 22.15, Sec. 9.)
Sec. 884.562. APPROVAL OF RATE ADJUSTMENT. A stipulated premium company may not adjust a life insurance premium rate under this subchapter before:
(1) obtaining the approval of the department; and
(2) providing notice to the policyholder. (V.T.I.C. Art. 22.15, Sec. 11.)
[Sections 884.563-884.600 reserved for expansion]
SUBCHAPTER M. CONVERSION TO LEGAL RESERVE COMPANY
Sec. 884.601. AUTHORIZATION TO CONVERT. (a) The shareholders of a stipulated premium company that possesses capital in an amount equal to at least $700,000, unencumbered surplus in an amount equal to at least $700,000, and sufficient reserves on hand for the company's policies as required under Subchapter C, Chapter 3, may convert the company to a legal reserve company that operates under Chapter 841 by complying with each requirement applicable to a company operating under that chapter.
(b) The department may approve the conversion only after determining that the converting company has complied with the requirements applicable to that company under Subsection (a). (V.T.I.C. Art. 22.20, Sec. 1 (part).)
Sec. 884.602. ASSUMPTION CERTIFICATE. (a) Not later than the 30th day after the date of a conversion under this subchapter, the converted company shall issue to each policyholder an assumption certificate by which the policy liability is assumed by the converted company.
(b) The certificate must contain all of the provisions applicable to a policy issued by a company operating under Chapter 841. (V.T.I.C. Art. 22.20, Sec. 1 (part).)
Sec. 884.603. EXEMPTION FROM CAPITAL AND SURPLUS REQUIREMENTS. (a) A stipulated premium company is exempt from the capital and surplus requirements of Section 884.601(a) if the company:
(1) was organized before September 1, 1989;
(2) possesses capital in an amount equal to at least $100,000 and unencumbered surplus in an amount equal to at least $100,000; and
(3) converted to a company that operates under Chapter 841 before September 1, 1999.
(b) A stipulated premium company that is exempt under Subsection (a) shall immediately increase its capital and surplus to amounts that satisfy Section 884.601(a) on:
(1) a change of control of at least 50 percent of the voting securities of the converted company; or
(2) if the converted company or the holding company that controls the converted company, if any, is not controlled by voting securities, a change of at least 50 percent of the ownership of the converted company or its holding company.
(c) For purposes of Subsection (b), a transfer of ownership that occurs because of death, regardless of whether the decedent died testate or intestate, may not be considered a change in the control of a converted stipulated premium insurer or holding company if ownership is transferred solely to one or more individuals, each of whom would be an heir of the decedent if the decedent had died intestate. (V.T.I.C. Art. 22.20, Sec. 2.)
[Sections 884.604-884.700 reserved for expansion]
SUBCHAPTER O. SUPERVISORY INTERVENTION; DISSOLUTION
Sec. 884.701. NOTICE OF INSOLVENCY, HAZARD, OR FAILURE TO COMPLY WITH LAW. The commissioner shall notify a stipulated premium company of the commissioner's determination if, at any time, the commissioner determines that:
(1) the company is insolvent;
(2) the company's condition renders the continuance of its business hazardous to the public or its policyholders; or
(3) the company appears to have exceeded its powers or not complied with the law. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.702. COMPLIANCE WITH NOTICE REQUIREMENTS; CONSEQUENCES OF FAILURE. A stipulated premium company shall, under the supervision of the commissioner, comply with the commissioner's requirements not later than the 30th day after the date the company receives notice under Section 884.701. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.703. FAILURE TO COMPLY. (a) If a stipulated premium company does not comply as required by Section 884.702, the commissioner or a conservator appointed by the commissioner shall immediately take charge of the company, including all of the company's property.
(b) The conservator under the direction of the commissioner shall operate the stipulated premium company pending the election of new directors and officers by the company's shareholders if the commissioner is satisfied that the company can best serve its policyholders and the public through that operation. The commissioner shall determine the manner of election of the new directors and officers.
(c) The conservator may, with the approval of the commissioner, reinsure any part of the stipulated premium company's policies or certificates of insurance with a solvent insurance company authorized to conduct business in this state. The conservator may transfer to the reinsurer the assets of the stipulated premium company that are required to reinsure those policies. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.704. COMMISSIONER'S ACTION WHEN COMPANY CANNOT CONTINUE BUSINESS. If the commissioner determines that the stipulated premium company cannot satisfactorily continue business in the interest of its policyholders and shareholders under the conservator, the commissioner shall, in the commissioner's discretion:
(1) reinsure the company's policies with a solvent company authorized to engage in the business of insurance in this state;
(2) direct the conservator to liquidate the company; or
(3) give notice to the attorney general for action under Section 884.705. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.705. ACTION BY ATTORNEY GENERAL. (a) After receiving notice under Section 884.704, the attorney general shall file in Travis County a suit in the nature of quo warranto to forfeit the charter of the stipulated premium company or to require the company to comply with the law or demonstrate its solvency to the commissioner's satisfaction.
(b) The court may:
(1) appoint an agent or receiver to take charge of the stipulated premium company's property and wind up the business of the company under the practice of equity; and
(2) dispose of the business and policies of the company as the court considers proper.
(c) Only the attorney general may file a suit for the appointment of a receiver for a stipulated premium company. A court may not appoint a receiver for a stipulated premium company unless the attorney general has applied for the receiver.
(d) A court may not appoint a receiver for a stipulated premium company before reasonable notice has been given and a hearing held. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.706. REPORT TO ATTORNEY GENERAL. (a) The commissioner shall report to the attorney general:
(1) the completion of the reinsurance or liquidation of all of the policies of a stipulated premium company and the conclusion of all of the company's affairs; or
(2) the commissioner's approval of the merger, reinsurance, or consolidation of the policies of one company with another.
(b) After receiving a report under this section, the attorney general shall take the action necessary to effect the forfeiture or cancellation of the charter of the stipulated premium company. (V.T.I.C. Art. 22.22 (part).)
Sec. 884.707. COST OF CONSERVATOR'S SERVICES. The commissioner shall determine the cost incident to a conservator's services under this subchapter. That cost is a charge against the assets of the stipulated premium company to be paid as the commissioner determines. (V.T.I.C. Art. 22.22 (part).)
CHAPTER 885. FRATERNAL BENEFIT SOCIETIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 885.001. DEFINITIONS
Sec. 885.002. LIMITED EXEMPTION FROM INSURANCE LAWS
Sec. 885.003. EXEMPTION FROM TAXATION
Sec. 885.004. INAPPLICABILITY TO CERTAIN SOCIETIES
Sec. 885.005. FRATERNAL BENEFIT SOCIETIES THAT PROVIDE
BENEFITS RESULTING FROM ACCIDENTS ONLY
Sec. 885.006. TREATMENT OF CERTAIN GRAND LODGES
[Sections 885.007-885.050 reserved for expansion]
SUBCHAPTER B. STRUCTURE OF FRATERNAL BENEFIT SOCIETY
Sec. 885.051. FRATERNAL BENEFIT SOCIETY DEFINED
Sec. 885.052. CONTROL OF FRATERNAL BENEFIT SOCIETY
Sec. 885.053. LODGE SYSTEM DEFINED
Sec. 885.054. REPRESENTATIVE FORM OF GOVERNMENT DEFINED
Sec. 885.055. ASSEMBLY AS SUPREME GOVERNING BODY
Sec. 885.056. ASSEMBLY MEETINGS; DIRECTORS
Sec. 885.057. BOARD AS SUPREME GOVERNING BODY
Sec. 885.058. BOARD MEMBERS; MEETINGS
Sec. 885.059. LOCATION OF MEETINGS OF SUPREME
GOVERNING BODY
Sec. 885.060. FRATERNAL BENEFIT SOCIETY'S LAWS BINDING
Sec. 885.061. AMENDMENT OF FRATERNAL BENEFIT SOCIETY'S
LAWS
Sec. 885.062. QUARTERLY LODGE MEETINGS REQUIRED
Sec. 885.063. MERGER OR TRANSFER OF MEMBERSHIP OR
FUNDS
[Sections 885.064-885.100 reserved for expansion]
SUBCHAPTER C. MEMBERS
Sec. 885.101. QUALIFICATIONS FOR FRATERNAL BENEFIT
SOCIETY MEMBERSHIP
Sec. 885.102. SOCIAL MEMBERS
Sec. 885.103. CHILDREN
Sec. 885.104. GRIEVANCE OR COMPLAINT PROCEDURES
[Sections 885.105-885.150 reserved for expansion]
SUBCHAPTER D. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 885.151. APPLICABILITY TO CERTAIN FRATERNAL BENEFIT
SOCIETIES CONTINUOUSLY AUTHORIZED TO
ENGAGE IN BUSINESS
Sec. 885.152. ELIGIBILITY TO PROVIDE BENEFITS
Sec. 885.153. FILING OF ARTICLES OF INCORPORATION OR
ASSOCIATION
Sec. 885.154. NAME OF FRATERNAL BENEFIT SOCIETY
Sec. 885.155. PURPOSES OF FRATERNAL BENEFIT SOCIETY
Sec. 885.156. SURETY BOND
Sec. 885.157. ISSUANCE OF PRELIMINARY CERTIFICATE OF
AUTHORITY
Sec. 885.158. POWERS AND DUTIES UNDER PRELIMINARY
CERTIFICATE OF AUTHORITY; QUALIFICATION
Sec. 885.159. TERMINATION OF AUTHORITY UNDER PRELIMINARY
CERTIFICATE OF AUTHORITY
Sec. 885.160. ISSUANCE OF CERTIFICATE OF AUTHORITY
[Sections 885.161-885.200 reserved for expansion]
SUBCHAPTER E. FOREIGN FRATERNAL BENEFIT SOCIETIES
Sec. 885.201. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 885.202. ADMISSION OF FOREIGN FRATERNAL BENEFIT
SOCIETY
Sec. 885.203. REFUSAL TO ISSUE CERTIFICATE OF AUTHORITY
TO FOREIGN FRATERNAL BENEFIT SOCIETY
Sec. 885.204. NOTICE OF INTENT TO REVOKE FOREIGN FRATERNAL
BENEFIT SOCIETY'S CERTIFICATE OF AUTHORITY
Sec. 885.205. REVOCATION OF FOREIGN FRATERNAL BENEFIT
SOCIETY'S CERTIFICATE OF AUTHORITY
Sec. 885.206. CONTINUANCE OF CONTRACTS FOLLOWING REVOCATION
OF CERTIFICATE OF AUTHORITY
[Sections 885.207-885.250 reserved for expansion]
SUBCHAPTER F. POWERS AND DUTIES OF FRATERNAL
BENEFIT SOCIETY
Sec. 885.251. GENERAL POWERS
Sec. 885.252. POWERS OF CERTAIN FRATERNAL BENEFIT
SOCIETIES
Sec. 885.253. PRINCIPAL OFFICE OF DOMESTIC FRATERNAL
BENEFIT SOCIETY
Sec. 885.254. IMMUNITY
Sec. 885.255. INDEMNIFICATION OR REIMBURSEMENT
Sec. 885.256. INDEMNIFICATION OR REIMBURSEMENT IN RELATION
TO BREACH OF DUTY PROHIBITED
Sec. 885.257. INSURANCE FOR DIRECTORS, OFFICERS,
EMPLOYEES, OR AGENTS
Sec. 885.258. MANAGEMENT AND USE OF ASSETS AND FUNDS
Sec. 885.259. SOURCE OF FUNDS
Sec. 885.260. SPECIFIED PAYMENTS
Sec. 885.261. CONTROL OF FUND BY LODGE
Sec. 885.262. INVESTMENT OF FRATERNAL BENEFIT SOCIETY
FUNDS
Sec. 885.263. TREATMENT OF DEFERRED CLAIMS
[Sections 885.264-885.300 reserved for expansion]
SUBCHAPTER G. BENEFITS PROVIDED BY FRATERNAL
BENEFIT SOCIETIES
Sec. 885.301. TYPES OF BENEFITS PERMITTED
Sec. 885.302. ISSUANCE OF BENEFIT CONTRACTS ON VARIABLE
BASIS
Sec. 885.303. BENEFITS FOR CHILDREN
Sec. 885.304. BENEFICIARIES
Sec. 885.305. ORGANIZATION AS BENEFICIARY
Sec. 885.306. BENEFIT CERTIFICATE
Sec. 885.307. GRACE PERIOD
Sec. 885.308. ASSIGNMENT OF LIFE INSURANCE BENEFIT
CONTRACT
Sec. 885.309. NONFORFEITURE BENEFITS
Sec. 885.310. ENFORCING PAYMENT OF PREMIUMS; CONTROL OF
BENEFIT CERTIFICATES
Sec. 885.311. DEFICIENCY PAYMENTS
Sec. 885.312. CONTINUATION OF BENEFIT CERTIFICATE ON
EXPULSION OR SUSPENSION OF MEMBER
Sec. 885.313. CONTINUATION OF BENEFIT CERTIFICATE ISSUED
ON CHILD
Sec. 885.314. RESPONSIBILITY FOR PAYMENT OF BENEFITS
Sec. 885.315. DAMAGES FOR FAILURE TO TIMELY PAY BENEFITS
Sec. 885.316. EXEMPTION OF BENEFITS
[Sections 885.317-885.350 reserved for expansion]
SUBCHAPTER H. AGENTS
Sec. 885.351. AGENTS
Sec. 885.352. EXCEPTION
Sec. 885.353. EMPLOYMENT OF CERTAIN PERSONS TO
SOLICIT BUSINESS PROHIBITED
[Sections 885.354-885.400 reserved for expansion]
SUBCHAPTER I. REGULATION OF FRATERNAL BENEFIT SOCIETIES
Sec. 885.401. ANNUAL REPORT
Sec. 885.402. REPORTS OF CERTAIN GRAND LODGES
Sec. 885.403. VALUATION OF BENEFIT CERTIFICATES
Sec. 885.404. MORTALITY TABLES; INTEREST RATES
Sec. 885.405. VALUATION OF AND SEPARATE FUND FOR
DISABILITY BENEFITS
Sec. 885.406. PUBLICATION OF VALUATION AND CONDITION
Sec. 885.407. SOLVENCY
Sec. 885.408. RESERVES FOR ACCIDENT AND HEALTH INSURANCE
Sec. 885.409. REPORTING OF RESERVES
Sec. 885.410. EXAMINATION OF DOMESTIC FRATERNAL BENEFIT
SOCIETIES
Sec. 885.411. EXAMINATION OF FOREIGN FRATERNAL BENEFIT
SOCIETIES
Sec. 885.412. ADVERSE PUBLICATION PROHIBITED
Sec. 885.413. FEES
Sec. 885.414. REMEDIES NOT EXCLUSIVE
[Sections 885.415-885.450 reserved for expansion]
SUBCHAPTER J. CONVERSION OF FRATERNAL BENEFIT SOCIETY
Sec. 885.451. CONVERSION OF FRATERNAL BENEFIT SOCIETY TO
MUTUAL OR STOCK COMPANY
Sec. 885.452. MEETING OF LODGE REPRESENTATIVES; NOTICE
Sec. 885.453. RESOLUTION TO CONVERT; ADDITIONAL
REQUIREMENTS
Sec. 885.454. CONVERSION DOCUMENTS
Sec. 885.455. SALE OF STOCK OF CONVERTED FRATERNAL
BENEFIT SOCIETY
Sec. 885.456. LEGAL EFFECT OF CONVERSION TO MUTUAL LIFE
INSURANCE COMPANY
Sec. 885.457. COMPLETION AND LEGAL EFFECT OF CONVERSION
TO STOCK COMPANY
Sec. 885.458. CONTINUING OBLIGATIONS OF CONVERTED
FRATERNAL BENEFIT SOCIETY
Sec. 885.459. NAME OF CONVERTED FRATERNAL BENEFIT SOCIETY
Sec. 885.460. PRINCIPAL OFFICE OF CONVERTED FRATERNAL
BENEFIT SOCIETY
Sec. 885.461. SOCIAL OR CHARITABLE CLUBS FORMED BY MEMBERS
OF CONVERTED FRATERNAL BENEFIT SOCIETY
[Sections 885.462-885.500 reserved for expansion]
SUBCHAPTER K. TERMINATION OF FRATERNAL BENEFIT SOCIETY
Sec. 885.501. DISCONTINUATION OF BUSINESS BY DOMESTIC
FRATERNAL BENEFIT SOCIETY
Sec. 885.502. INITIATION OF PROCEEDINGS FOR TERMINATION
OF DOMESTIC FRATERNAL BENEFIT SOCIETY
Sec. 885.503. ISSUANCE OF INJUNCTION AND APPOINTMENT OF
RECEIVER
[Sections 885.504-885.700 reserved for expansion]
SUBCHAPTER O. CRIMINAL PENALTIES
Sec. 885.701. FALSE STATEMENTS; CRIMINAL PENALTY
Sec. 885.702. SOLICITING MEMBERSHIP IN UNAUTHORIZED
FRATERNAL BENEFIT SOCIETY; CRIMINAL PENALTY
Sec. 885.703. SOLICITING MEMBERSHIP IN LODGE OF
UNAUTHORIZED FRATERNAL BENEFIT SOCIETY;
CRIMINAL PENALTY
Sec. 885.704. EXCEPTION TO SOLICITATION OFFENSES
Sec. 885.705. GENERAL CRIMINAL PENALTY
Sec. 885.706. OTHER PENALTIES
CHAPTER 885. FRATERNAL BENEFIT SOCIETIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 885.001. DEFINITIONS. In this chapter:
(1) "Benefit certificate" means a document issued as written evidence of a benefit contract.
(2) "Benefit contract" means an agreement for provision of benefits authorized by Section 885.301, as that agreement is described by Section 885.306.
(3) "Benefit member" means an adult designated by the laws or rules of a fraternal benefit society as a benefit member under a benefit contract.
(4) "Fraternal benefit society's laws" means a fraternal benefit society's articles of incorporation, constitution, and bylaws, however designated.
(5) "Lodge" means a subordinate member unit of a fraternal benefit society. The term includes a camp, court, council, or branch.
(6) "Premium" means a premium, a rate, dues, or another required contribution that is payable under a benefit certificate or benefit contract.
(7) "Rule" means a rule, regulation, or resolution adopted by the supreme governing body or board of directors that has general application to the members of a fraternal benefit society. (V.T.I.C. Art. 10.03-1.)
Sec. 885.002. LIMITED EXEMPTION FROM INSURANCE LAWS. (a) Except as provided by this chapter, a fraternal benefit society is governed by this chapter and is exempt from all other insurance laws of this state for all purposes.
(b) A law enacted after July 1, 1913, does not apply to fraternal benefit societies unless a fraternal benefit society is expressly designated in the law. (V.T.I.C. Art. 10.04.)
Sec. 885.003. EXEMPTION FROM TAXATION. (a) A fraternal benefit society organized or holding a certificate of authority under this chapter, including the former Chapter 10 of this code and Chapter 8, Title 78, Revised Statutes, is a charitable and benevolent institution. Except as provided by Subsection (b), all funds of a fraternal benefit society described by this subsection are exempt from any state, county, district, municipal, or school tax, including an occupation tax.
(b) Real estate or office equipment used for a purpose other than a lodge purpose is subject to taxation. (V.T.I.C. Art. 10.39.)
Sec. 885.004. INAPPLICABILITY TO CERTAIN SOCIETIES. (a) Except as provided by Subsection (b), this chapter does not apply to:
(1) a grand or subordinate lodge of Masons, Odd Fellows, Knights of Pythias, or the Junior Order of the United American Mechanics;
(2) a society that limits its membership to those engaged in one or more hazardous occupations in the same or similar lines of business;
(3) a society that does not issue benefit certificates;
(4) an association of local lodges of a society engaged in business in this state on July 1, 1913, that provides:
(A) death benefits of not more than $500 to any one individual;
(B) disability benefits of not more than $300 in any one year to any one individual; or
(C) both death benefits described by Paragraph (A) and disability benefits described by Paragraph (B);
(5) a contract of reinsurance on a plan in this state described by Subdivision (4);
(6) a domestic society that limits its membership to the employees of:
(A) a particular municipality; or
(B) a designated firm or corporation; or
(7) a domestic lodge, order, or association of a purely religious, charitable, and benevolent description that does not provide:
(A) death benefits of more than $100; or
(B) disability benefits of more than $150 to any one individual in any one year.
(b) This chapter applies to:
(1) the insurance department of the supreme lodge Knights of Pythias; and
(2) the beneficiary degree of insurance branch of the Junior Order of the United American Mechanics.
(c) The department may require from any society information that will permit the department to determine whether the society is exempt from this chapter. (V.T.I.C. Art. 10.12, Subsec. (e); Art. 10.38 (part).)
Sec. 885.005. FRATERNAL BENEFIT SOCIETIES THAT PROVIDE BENEFITS RESULTING FROM ACCIDENTS ONLY. (a) A fraternal benefit society that provides benefits for death or disability resulting from accidents only and does not provide death benefits or benefits for sickness may hold a certificate of authority under this chapter if the society:
(1) was organized and incorporated before July 1, 1913; and
(2) operates as provided by Sections 885.051-885.054 and 885.062.
(b) A fraternal benefit society that holds a certificate of authority as provided by Subsection (a) may exercise all the privileges provided by and is subject to this chapter other than:
(1) provisions requiring medical examination;
(2) provisions requiring that a benefit certificate specify the amount of benefits; and
(3) provisions relating to the valuation of benefit certificates. (V.T.I.C. Art. 10.38 (part).)
Sec. 885.006. TREATMENT OF CERTAIN GRAND LODGES. A grand lodge, by whatever name known and without regard to whether incorporated, that holds a charter from any supreme governing body and that was engaging in business in this state on July 1, 1913, as a fraternal beneficiary association under the separate jurisdiction plan is considered to be a single state organization. (V.T.I.C. Art. 10.27 (part).)
[Sections 885.007-885.050 reserved for expansion]
SUBCHAPTER B. STRUCTURE OF FRATERNAL BENEFIT SOCIETY
Sec. 885.051. FRATERNAL BENEFIT SOCIETY DEFINED. A corporation, society, order, or voluntary association is a fraternal benefit society if it:
(1) has a lodge system and a representative form of government or limits its membership to a secret fraternity that has a lodge system and a representative form of government;
(2) is organized and operated solely for the mutual benefit of its members and their beneficiaries and not for profit;
(3) does not have capital stock; and
(4) provides for the payment of benefits in accordance with Section 885.301. (V.T.I.C. Art. 10.01, Subsec. (a) (part).)
Sec. 885.052. CONTROL OF FRATERNAL BENEFIT SOCIETY. (a) In this section, "control" has the meaning described by Sections 823.005 and 823.151.
(b) Control of a fraternal benefit society must be ultimately vested in the membership as provided by this chapter. Control of a fraternal benefit society may be exercised by lodges and a supreme governing body elected under Section 885.054.
(c) The methods provided by this section for exercising control over a fraternal benefit society are exclusive.
(d) Chapter 823 applies to a fraternal benefit society. Each change in control of a fraternal benefit society must be consistent with the nature of a fraternal benefit society as specified by this section, Sections 885.051, 885.053, and 885.054, and other applicable law. (V.T.I.C. Art. 10.01, Subsec. (b); Art. 10.21, Subsec. (c).)
Sec. 885.053. LODGE SYSTEM DEFINED. A fraternal benefit society is considered to be operating on the lodge system if the society:
(1) has a supreme governing body; and
(2) has lodges:
(A) into which members are admitted in accordance with the fraternal benefit society's laws, rituals, and rules; and
(B) that are required by the fraternal benefit society's laws to hold periodic meetings. (V.T.I.C. Art. 10.02 (part).)
Sec. 885.054. REPRESENTATIVE FORM OF GOVERNMENT DEFINED. A fraternal benefit society has a representative form of government if:
(1) the society has a supreme governing body constituted as:
(A) an assembly, as described by Section 885.055; or
(B) a board, as described by Section 885.057;
(2) the officers of the society are elected by the supreme governing body or the board of directors;
(3) only a benefit member is eligible to serve as a member of the supreme governing body, the board of directors, or an intermediate assembly of the society;
(4) only a benefit member may vote on the management of the society's insurance affairs;
(5) a voting member of the society has only one vote; and
(6) a voting member of the society may not cast a vote by proxy. (V.T.I.C. Art. 10.03.)
Sec. 885.055. ASSEMBLY AS SUPREME GOVERNING BODY. (a) The supreme governing body of a fraternal benefit society is an assembly if the body is composed of:
(1) delegates elected directly by the members or at intermediate assemblies or conventions by the members or their representatives; and
(2) other delegates as prescribed by the fraternal benefit society's laws.
(b) The elected delegates to an assembly must:
(1) constitute a majority of the assembly in number; and
(2) be entitled to cast the greater of:
(A) two-thirds of the votes in the assembly; or
(B) the number of votes required to amend the fraternal benefit society's laws.
(c) A fraternal benefit society may provide for election of delegates by mail. (V.T.I.C. Art. 10.03A, Subsecs. (a), (b), (c).)
Sec. 885.056. ASSEMBLY MEETINGS; DIRECTORS. (a) An assembly that is the supreme governing body of a fraternal benefit society shall:
(1) meet at least once every four years; and
(2) elect a board of directors to conduct the business of the society between meetings of the assembly.
(b) A vacancy on the board of directors that occurs between elections may be filled in the manner prescribed by the fraternal benefit society's laws. (V.T.I.C. Art. 10.03A, Subsecs. (d), (e).)
Sec. 885.057. BOARD AS SUPREME GOVERNING BODY. (a) The supreme governing body of a fraternal benefit society is a board if the body is composed of:
(1) individuals elected directly by the members or at intermediate assemblies by the members or their representatives; and
(2) other individuals as prescribed by the fraternal benefit society's laws.
(b) The individuals elected to the board must:
(1) constitute a majority of the board in number; and
(2) have at least the number of votes required to amend the fraternal benefit society's laws, other than laws, if any, that must be amended by direct vote of the members.
(c) A fraternal benefit society may provide for election of the board by mail. (V.T.I.C. Art. 10.03B, Subsecs. (a), (b), (c).)
Sec. 885.058. BOARD MEMBERS; MEETINGS. (a) The term of a member of a board that is the supreme governing body of a fraternal benefit society may not exceed four years.
(b) A vacancy on the board that occurs between elections may be filled in the manner prescribed by the fraternal benefit society's laws. An individual filling the unexpired term of an elected board member is considered to be an elected member.
(c) A board shall meet at least annually to conduct the business of the fraternal benefit society. (V.T.I.C. Art. 10.03B, Subsecs. (d), (e), (f).)
Sec. 885.059. LOCATION OF MEETINGS OF SUPREME GOVERNING BODY. (a) A domestic fraternal benefit society may provide that its supreme governing body may hold meetings in any state, district, province, or territory in which the society has a lodge.
(b) All business transacted at a meeting authorized under Subsection (a) is as valid in all respects as if the meeting were held in this state. (V.T.I.C. Art. 10.25 (part).)
Sec. 885.060. FRATERNAL BENEFIT SOCIETY'S LAWS BINDING. A fraternal benefit society's laws may provide that a lodge or a subordinate officer or member of the society may not waive any provision of those laws. Those laws are binding on:
(1) the society;
(2) each member of the society; and
(3) each beneficiary of a member. (V.T.I.C. Art. 10.27 (part).)
Sec. 885.061. AMENDMENT OF FRATERNAL BENEFIT SOCIETY'S LAWS. (a) A fraternal benefit society transacting business under this chapter shall file with the department a certified copy of each amendment of the fraternal benefit society's laws not later than the 90th day after the date of enactment of the amendment.
(b) A printed copy of a fraternal benefit society's laws, as amended, that is certified by the society's secretary or corresponding officer is prima facie evidence that the laws were legally adopted. (V.T.I.C. Art. 10.29.)
Sec. 885.062. QUARTERLY LODGE MEETINGS REQUIRED. A fraternal benefit society's laws must require each lodge to hold regular meetings at least once each calendar quarter to further the society's purposes. (V.T.I.C. Art. 10.02 (part).)
Sec. 885.063. MERGER OR TRANSFER OF MEMBERSHIP OR FUNDS. (a) A domestic fraternal benefit society may not merge with or accept a transfer of the membership or funds of another fraternal benefit society unless:
(1) the merger or transfer is evidenced by a written contract that fully sets out the terms of the merger or transfer; and
(2) the societies file with the department:
(A) a copy of the contract;
(B) a sworn statement of the financial condition of each society by its president and secretary or corresponding officers; and
(C) a certificate of those officers, verified under oath, that the merger or transfer has been approved by a vote of two-thirds of the members of the supreme governing body of each society.
(b) On submission, the commissioner shall examine the contract, financial statements, and certificates. The commissioner shall approve the merger or transfer and issue a certificate to that effect if the commissioner determines that:
(1) the contract conforms with this section and Section 885.052(d);
(2) the financial statements are correct;
(3) the merger or transfer is just and equitable to the members of each society; and
(4) the new or surviving society complies with each requirement of a fraternal benefit society under this chapter.
(c) A contract of merger or transfer takes effect on issuance of a certificate under Subsection (b). (V.T.I.C. Art. 10.21, Subsecs. (a), (b).)
[Sections 885.064-885.100 reserved for expansion]
SUBCHAPTER C. MEMBERS
Sec. 885.101. QUALIFICATIONS FOR FRATERNAL BENEFIT SOCIETY MEMBERSHIP. (a) A fraternal benefit society shall specify in the fraternal benefit society's laws or rules:
(1) subject to Subsection (b), the eligibility standards for each membership class;
(2) the process for admission for each membership class; and
(3) subject to Subsection (c), the rights and privileges of each membership class.
(b) If a fraternal benefit society provides benefits on the lives of children, the minimum age for adult membership may not be less than 15 years or more than 21 years.
(c) Only a benefit member may vote on the management of the insurance affairs of a fraternal benefit society.
(d) Membership rights in a fraternal benefit society are personal to the member, and a member may not assign those rights. (V.T.I.C. Art. 10.12, Subsecs. (a), (c).)
Sec. 885.102. SOCIAL MEMBERS. A fraternal benefit society may admit social members. A social member may not vote in the management of the insurance affairs of the society. (V.T.I.C. Art. 10.12, Subsec. (b).)
Sec. 885.103. CHILDREN. (a) A fraternal benefit society may organize and operate branches for children on whose lives the society provides insurance or annuities.
(b) A child is not required to be a member of a lodge or to be initiated in a lodge.
(c) A child may not have any voice in the management of a fraternal benefit society. (V.T.I.C. Art. 10.06 (part).)
Sec. 885.104. GRIEVANCE OR COMPLAINT PROCEDURES. A fraternal benefit society's laws or rules may provide for grievance or complaint procedures for members. (V.T.I.C. Art. 10.12, Subsec. (d).)
[Sections 885.105-885.150 reserved for expansion]
SUBCHAPTER D. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 885.151. APPLICABILITY TO CERTAIN FRATERNAL BENEFIT SOCIETIES CONTINUOUSLY AUTHORIZED TO ENGAGE IN BUSINESS. This subchapter does not apply to a fraternal benefit society authorized to engage in business in this state on June 1, 1965, as long as the society's certificate of authority or any renewal or extension of its certificate of authority continues in force. (V.T.I.C. Art. 10.19, Subsec. (g) (part).)
Sec. 885.152. ELIGIBILITY TO PROVIDE BENEFITS. After June 1, 1965, a corporation, society, order, or voluntary association may qualify as a fraternal benefit society as defined by Section 885.051 for the purpose of providing for the payment of benefits as provided by Section 885.301 only if it:
(1) has at least 500 members and at least 10 lodges; and
(2) has been in continuous operation for at least the five years preceding the filing of its articles of incorporation or association as provided by Section 885.153. (V.T.I.C. Art. 10.19, Subsec. (a) (part).)
Sec. 885.153. FILING OF ARTICLES OF INCORPORATION OR ASSOCIATION. A corporation, society, order, or voluntary association eligible under Section 885.152 may qualify as a fraternal benefit society by filing with the department:
(1) certified articles of incorporation or association that set out:
(A) the name of the society;
(B) the purpose for which the society is formed; and
(C) the manner in which the society's corporate powers are to be exercised;
(2) certified copies of the fraternal benefit society's laws and rules;
(3) copies of all proposed forms of benefit certificates, applications for benefit certificates, and circulars to be issued by the society;
(4) a surety bond as required by Section 885.156; and
(5) additional information that the commissioner considers necessary. (V.T.I.C. Art. 10.19, Subsecs. (a) (part), (b) (part).)
Sec. 885.154. NAME OF FRATERNAL BENEFIT SOCIETY. The name of a fraternal benefit society may not so closely resemble the name of any society or insurance company engaging in business in this state as to mislead the public or lead to confusion. (V.T.I.C. Art. 10.19, Subsec. (a) (part).)
Sec. 885.155. PURPOSES OF FRATERNAL BENEFIT SOCIETY. (a) The purposes for which a fraternal benefit society is organized may not include more liberal powers than are granted by this chapter. Any lawful, social, intellectual, educational, charitable, benevolent, moral, fraternal, patriotic, or religious advantages may be set out among the society's purposes.
(b) A fraternal benefit society's purposes may be implemented directly by the society or indirectly through subsidiary corporations or affiliated organizations. (V.T.I.C. Art. 10.19, Subsec. (a) (part).)
Sec. 885.156. SURETY BOND. (a) A fraternal benefit society must file with the department a bond in an amount not less than $300,000 and not more than $1.5 million, as required by the commissioner, with sureties approved by the commissioner.
(b) The bond must be conditioned on the return of advance payments to applicants for benefit certificates as provided by this subchapter if the fraternal benefit society fails to qualify under this subchapter within one year. (V.T.I.C. Art. 10.19, Subsec. (b) (part).)
Sec. 885.157. ISSUANCE OF PRELIMINARY CERTIFICATE OF AUTHORITY. If the purposes of a fraternal benefit society conform to the requirements of this chapter and all provisions of law have been complied with, the commissioner shall:
(1) certify that the society is in compliance with all provisions of law;
(2) retain and record the articles of incorporation or association; and
(3) issue to the society a preliminary certificate of authority. (V.T.I.C. Art. 10.19, Subsec. (b) (part).)
Sec. 885.158. POWERS AND DUTIES UNDER PRELIMINARY CERTIFICATE OF AUTHORITY; QUALIFICATION. (a) On receipt of a preliminary certificate of authority from the department under Section 885.157, a fraternal benefit society:
(1) may solicit from its members applications for insurance benefits for the purpose of completing the society's qualification;
(2) shall collect from each applicant an amount equal to at least one regular monthly payment, in accordance with the society's table of rates as provided by the fraternal benefit society's laws; and
(3) shall issue to each applicant a receipt for the amount collected under Subdivision (2).
(b) A fraternal benefit society operating under a preliminary certificate of authority may not incur a liability other than for advance payments collected under Subsection (a)(2), issue a benefit certificate, or pay, allow, or offer or promise to pay or allow to any person a death or disability benefit until:
(1) the society has established 10 lodges into which at least 500 applicants have been initiated;
(2) the society has received bona fide applications for death benefit certificates on at least 500 lives for at least $2,000 each;
(3) each applicant for death benefits under Subdivision (2) has been regularly examined by a legally qualified practicing physician;
(4) a certificate of each medical examination has been filed with and approved by the chief medical examiner of the society;
(5) the society submits to the department a list of the applicants for death benefits under Subdivision (2); and
(6) the society shows to the department, by the sworn statement of its treasurer or corresponding officer, that at least 500 applicants have each paid in cash in advance at least one regular monthly payment per $1,000 of indemnity to be provided and that the payments in the aggregate amount to at least $150,000.
(c) The list of applicants for death benefits submitted under Subsection (b)(5) must be under oath of the fraternal benefit society's president and secretary or corresponding officers and must provide for each applicant:
(1) the applicant's name and address;
(2) the date the applicant was examined;
(3) the date the applicant was approved;
(4) the date the applicant was initiated;
(5) the name and number of the lodge of which the applicant is a member;
(6) the amount of benefits to be granted; and
(7) the rate of stated premiums.
(d) The rate of stated premiums under Subsection (c)(7) must be sufficient to provide for meeting the obligations the fraternal benefit society has contracted to pay, when valued for death benefits on the basis of the National Fraternal Congress Table of Mortality, as adopted by the National Fraternal Congress, August 23, 1899, or, at the society's option, any higher standard, and for disability benefits or combined death and permanent total disability benefits by tables based on reliable experience, with an interest assumption not greater than a rate of four percent a year.
(e) A fraternal benefit society shall hold advance payments received under this section in trust during the period of completing qualification. The society shall credit the advance payments to the mortuary or disability fund on account of the applicants and may not use any part of the payments for expenses. If the society does not complete its qualification within one year, as provided by this subchapter, the society shall return the advance payments to the applicants. (V.T.I.C. Art. 10.19, Subsecs. (c), (d).)
Sec. 885.159. TERMINATION OF AUTHORITY UNDER PRELIMINARY CERTIFICATE OF AUTHORITY. (a) Unless a fraternal benefit society has qualified under this subchapter, a preliminary certificate of authority granted under Section 885.157 is void on the first anniversary of the date the certificate is issued.
(b) The department, on cause shown, may extend the period prescribed by Subsection (a). An extension may not exceed one year. (V.T.I.C. Art. 10.19, Subsec. (f).)
Sec. 885.160. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The department may make an examination and require information in addition to that required by Section 885.158(b) that the department considers advisable. On presentation of satisfactory evidence that a fraternal benefit society has complied with all provisions of law, the department shall issue to the society a certificate of authority.
(b) The certificate of authority issued is prima facie evidence of the qualification of the fraternal benefit society as of the date of the certificate.
(c) The department shall make a record of a certificate of authority issued under Subsection (a). A certified copy or duplicate of the department's record shall be accepted in evidence with the same effect as the original certificate. (V.T.I.C. Art. 10.19, Subsec. (e); Art. 10.22 (part).)
[Sections 885.161-885.200 reserved for expansion]
SUBCHAPTER E. FOREIGN FRATERNAL BENEFIT SOCIETIES
Sec. 885.201. CERTIFICATE OF AUTHORITY REQUIRED. A foreign fraternal benefit society organized and engaging in business before July 1, 1913, that was not authorized to engage in business in this state as of that date may not engage in business in this state without a certificate of authority from the commissioner. (V.T.I.C. Art. 10.23 (part).)
Sec. 885.202. ADMISSION OF FOREIGN FRATERNAL BENEFIT SOCIETY. (a) To engage in business in this state, a foreign fraternal benefit society described by Section 885.201 must:
(1) have the qualifications required of a domestic fraternal benefit society under this chapter; and
(2) have its assets invested as required by the laws of the state, territory, district, province, or country in which the society is organized.
(b) A foreign fraternal benefit society described by Section 885.201 is entitled to a certificate of authority to engage in business in this state on filing with the department:
(1) a certified copy of the society's charter or articles of association;
(2) a copy of the fraternal benefit society's laws, certified by its secretary or corresponding officer;
(3) a statement of the society's business;
(4) a certificate from the proper official in the society's home state, province, or country showing that the society is legally organized;
(5) a copy of the society's benefit contract;
(6) information showing that the society's assets are invested as required by Subsection (a)(2); and
(7) additional information the commissioner considers necessary to demonstrate the society's business and method of operation.
(c) A statement of business filed by a foreign fraternal benefit society under Subsection (b)(3) must:
(1) be under oath of the society's president and secretary or corresponding officers;
(2) be in the form required by the commissioner; and
(3) be verified by an examination made by the supervising insurance official of the society's home state or another state satisfactory to the commissioner.
(d) A benefit contract filed by a foreign fraternal benefit society under Subsection (b)(5) must show that benefits are provided for by premiums paid by persons holding similar contracts.
(e) The commissioner shall issue a certificate of authority to a foreign fraternal benefit society that complies with Subsection (b). (V.T.I.C. Art. 10.23 (part).)
Sec. 885.203. REFUSAL TO ISSUE CERTIFICATE OF AUTHORITY TO FOREIGN FRATERNAL BENEFIT SOCIETY. (a) If the commissioner refuses to issue a certificate of authority to a foreign fraternal benefit society under Section 885.202, the commissioner shall:
(1) make the refusal in writing;
(2) file the refusal in the department's office; and
(3) on request, provide a copy of the refusal and a statement of the commissioner's reasons for the refusal to the society's officers.
(b) The commissioner's refusal to issue a certificate of authority to a foreign fraternal benefit society for authority to engage in business in this state is reviewable by proper proceedings in any state court. (V.T.I.C. Art. 10.23 (part).)
Sec. 885.204. NOTICE OF INTENT TO REVOKE FOREIGN FRATERNAL BENEFIT SOCIETY'S CERTIFICATE OF AUTHORITY. (a) The commissioner shall notify a foreign fraternal benefit society engaging in business under this chapter of the commissioner's determination if, following an investigation, the commissioner determines that the society:
(1) has failed to comply with this chapter;
(2) has exceeded its powers;
(3) is not fulfilling its contracts in good faith; or
(4) is engaging in business fraudulently.
(b) A notification under Subsection (a) must:
(1) state in writing the grounds of the commissioner's dissatisfaction; and
(2) require that the society, after reasonable notice and on the date stated in the notice, show cause why the society's certificate of authority should not be revoked. (V.T.I.C. Art. 10.37 (part).)
Sec. 885.205. REVOCATION OF FOREIGN FRATERNAL BENEFIT SOCIETY'S CERTIFICATE OF AUTHORITY. (a) The commissioner may revoke a foreign fraternal benefit society's certificate of authority to engage in business in this state if, on the date stated in the notice under Section 885.204, the society:
(1) has not, to the commissioner's satisfaction, removed the commissioner's objections; or
(2) does not present good and sufficient reason why its certificate of authority should not be revoked.
(b) Section 885.203 applies to a decision by the commissioner to revoke a foreign fraternal benefit society's authority to engage in business in this state as if it were a decision to refuse to issue a certificate of authority. (V.T.I.C. Arts. 10.23 (part), 10.37 (part).)
Sec. 885.206. CONTINUANCE OF CONTRACTS FOLLOWING REVOCATION OF CERTIFICATE OF AUTHORITY. This subchapter may not be construed to prevent a foreign fraternal benefit society that has had its certificate of authority refused under former Article 10.23, Insurance Code, or a predecessor to that statute, or that has had its certificate of authority revoked, from continuing in good faith each contract made in this state during the time the society was authorized to engage in business in this state. (V.T.I.C. Art. 10.23 (part).)
[Sections 885.207-885.250 reserved for expansion]
SUBCHAPTER F. POWERS AND DUTIES OF FRATERNAL
BENEFIT SOCIETY
Sec. 885.251. GENERAL POWERS. A fraternal benefit society may:
(1) make a constitution and bylaws for the government of the society, the admission of its members, the management of its affairs, and the setting and readjusting of premiums;
(2) amend its constitution and bylaws; and
(3) exercise other powers necessary and incidental to achieving its purposes. (V.T.I.C. Art. 10.19, Subsec. (h) (part).)
Sec. 885.252. POWERS OF CERTAIN FRATERNAL BENEFIT SOCIETIES. (a) A fraternal benefit society engaged in business in this state on July 1, 1913, may exercise:
(1) each right conferred by this chapter; and
(2) if the society is incorporated, each right, power, or privilege exercised or possessed as of July 1, 1913, by the society under its charter or articles of incorporation consistent with this chapter.
(b) A fraternal benefit society engaged in business in this state on July 1, 1913, that is a voluntary association may incorporate under this chapter.
(c) A fraternal benefit society organized as of July 1, 1913, is not required to reincorporate under this chapter and may amend the society's articles of incorporation in the manner provided in the articles or the fraternal benefit society's laws. A society shall file an amendment described by this subsection with the department. The amendment becomes operative on filing unless a later time is provided in the amendment or in the fraternal benefit society's articles of incorporation or laws. (V.T.I.C. Art. 10.20.)
Sec. 885.253. PRINCIPAL OFFICE OF DOMESTIC FRATERNAL BENEFIT SOCIETY. A domestic fraternal benefit society shall have its principal office in this state. (V.T.I.C. Art. 10.25 (part).)
Sec. 885.254. IMMUNITY. (a) A director, officer, employee, member, or volunteer of a fraternal benefit society serving without compensation is not personally liable for damages resulting from an act or omission in the exercise of judgment or discretion in connection with the duties of that person for the society unless the act or omission involved wilful or wanton misconduct.
(b) This section does not limit a fraternal benefit society's direct or indirect liability. (V.T.I.C. Art. 10.26, Subsec. (i).)
Sec. 885.255. INDEMNIFICATION OR REIMBURSEMENT. (a) A fraternal benefit society may indemnify and reimburse a person for expenses reasonably incurred by, and liabilities imposed on, that person in connection with or arising out of a proceeding, whether civil, criminal, administrative, or investigative, in which the person is involved, or in connection with or arising out of a threat of a proceeding against that person, because that person is or was a director, officer, employee, or agent of:
(1) the society; or
(2) a firm, corporation, or organization with which the person served in any capacity at the request of the society.
(b) The right of indemnification and reimbursement under Subsection (a) is not exclusive of other rights to which a person may be entitled as a matter of law and inures to the benefit of the person's devisees, legatees, heirs, and estate. (V.T.I.C. Art. 10.26, Subsecs. (b), (g).)
Sec. 885.256. INDEMNIFICATION OR REIMBURSEMENT IN RELATION TO BREACH OF DUTY PROHIBITED. (a) Except as provided by Subsection (b), a person may not be indemnified or reimbursed under Section 885.255 in relation to:
(1) a matter in a proceeding in which the person is finally adjudged guilty of breach of a duty as a director, officer, employee, or agent of the fraternal benefit society; or
(2) an agreement that settles:
(A) a matter in a proceeding described by Subdivision (1); or
(B) the threat of a proceeding involving the person's alleged breach of a duty as a director, officer, employee, or agent of a fraternal benefit society.
(b) A fraternal benefit society may indemnify or reimburse a person in relation to a matter described by Subsection (a) only if the supreme governing body, the board of directors, or a court determines that:
(1) the person acted in good faith for a purpose the person reasonably believed to be in or not opposed to the best interests of the society; and
(2) in a criminal proceeding, the person had no reasonable cause to believe that the person's conduct was unlawful.
(c) A determination by a supreme governing body or board of directors under Subsection (b) must be made by majority vote of a quorum consisting of persons who were not parties to the proceeding under review.
(d) The termination of a proceeding by judgment, order, settlement, or conviction or on a plea of no contest does not create a conclusive presumption that a person does not meet the standard of conduct required to justify indemnification and reimbursement. (V.T.I.C. Art. 10.26, Subsecs. (c), (d), (e), (f).)
Sec. 885.257. INSURANCE FOR DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS. (a) A fraternal benefit society may purchase and maintain insurance on behalf of a person who is or was a director, officer, employee, or agent of the society or who is or was serving at the request of the society as a director, officer, employee, or agent of another firm, corporation, or organization against a liability asserted against that person or incurred by that person in any capacity or arising out of that person's status as a director, officer, employee, or agent of the society or the other firm, corporation, or organization.
(b) A fraternal benefit society may purchase and maintain insurance under this section regardless of whether the society has the power to indemnify or reimburse the person with respect to the covered liability under Sections 885.255 and 885.256. (V.T.I.C. Art. 10.26, Subsec. (h).)
Sec. 885.258. MANAGEMENT AND USE OF ASSETS AND FUNDS. (a) A fraternal benefit society shall hold, invest, and disburse all assets for the use and benefit of the society. A member or beneficiary may not have or acquire individual rights in the assets of a fraternal benefit society or become entitled to any apportionment or surrender of any part of a society's assets except as provided by a benefit contract.
(b) A fraternal benefit society may create, maintain, invest, disburse, and apply any special fund necessary to implement any purpose permitted by the fraternal benefit society's laws.
(c) A fraternal benefit society may create, maintain, invest, disburse, and apply an emergency surplus or other similar fund in accordance with the fraternal benefit society's laws. Unless otherwise provided by a benefit contract, a fraternal benefit society shall hold, invest, and disburse a fund created under this subsection for the use and benefit of the society. A member or beneficiary may not have or acquire individual rights in a fund created under this subsection or become entitled to any apportionment or the surrender of any part of the fund except as provided by Section 885.301. (V.T.I.C. Art. 10.16 (part); Art. 10.18, Subsecs. (a), (b).)
Sec. 885.259. SOURCE OF FUNDS. (a) A fraternal benefit society shall derive the funds from which the society pays benefits and the funds from which the society defrays its expenses from:
(1) premiums paid by members of the society; and
(2) accretions of those funds.
(b) A domestic or foreign fraternal benefit society may not engage in business in this state unless the society provides for stated premiums sufficient to permit meeting the obligations contracted, when valued in accordance with the reserving standards specified by this chapter. (V.T.I.C. Art. 10.16 (part).)
Sec. 885.260. SPECIFIED PAYMENTS. (a) A fraternal benefit society may provide in the fraternal benefit society's laws and benefit certificates for specified payments on account of the expense or general fund.
(b) A payment under this section may or may not be mingled with the general fund of the fraternal benefit society as provided by the society's constitution and bylaws. (V.T.I.C. Art. 10.10.)
Sec. 885.261. CONTROL OF FUND BY LODGE. (a) This section applies if the constitution and bylaws of the grand lodge or governing body of a fraternal benefit society:
(1) provide that all or part of the beneficiary, mortuary, or insurance fund of the society that is paid by or collected from the members of a lodge may be retained in the custody of and controlled and managed by the lodge; and
(2) designate an officer of the lodge to have custody and control of a fund described by Subdivision (1) and authority to loan or invest the fund.
(b) A lodge officer having custody and control of a fund described by Subsection (a)(1) shall execute a bond or other written instrument to be prescribed and approved in terms and amount by the commissioner to indemnify the fund against waste, depletion, or loss. The lodge officer shall file the bond or other written instrument with the department, if required to do so by the department.
(c) A fund secured as provided by Subsection (b) is exempt from this chapter. (V.T.I.C. Art. 10.17 (part).)
Sec. 885.262. INVESTMENT OF FRATERNAL BENEFIT SOCIETY FUNDS. (a) Except as provided by Subsection (b), a fraternal benefit society may invest its funds only in securities permitted by state law for the investment of the assets of life insurance companies.
(b) A foreign fraternal benefit society authorized to or seeking to engage in the business of insurance in this state that invests its funds in accordance with the laws of the state in which the society is incorporated is considered to meet the requirements of this chapter for the investment of funds. (V.T.I.C. Art. 10.17 (part).)
Sec. 885.263. TREATMENT OF DEFERRED CLAIMS. (a) A deferred payment or an installment of a claim is considered to be a fixed liability on the occurrence of the contingency on which the payment or installment is to be paid. The amount of the liability is the present value of the future payment or installment at the rates of interest and mortality assumed by the fraternal benefit society for valuation.
(b) A fraternal benefit society shall maintain a fund sufficient to meet each fixed liability under Subsection (a) regardless of proposed future collections to meet the liability. (V.T.I.C. Art. 10.16 (part).)
[Sections 885.264-885.300 reserved for expansion]
SUBCHAPTER G. BENEFITS PROVIDED BY FRATERNAL
BENEFIT SOCIETIES
Sec. 885.301. TYPES OF BENEFITS PERMITTED. (a) A fraternal benefit society may provide for the payment of:
(1) death benefits in any form;
(2) endowment benefits;
(3) annuity benefits;
(4) benefits for temporary or permanent disability resulting from disease or accident;
(5) benefits for hospital, medical, or nursing expenses resulting from sickness, bodily infirmity, or accident;
(6) benefits for the erection of a monument or tombstone to the memory of a deceased member;
(7) funeral benefits; and
(8) any other benefit that may be provided by a life, accident, or health insurance company and that is:
(A) offered in compliance with the provisions of Chapter 3 and Title 7 applicable to a life, accident, or health insurance company; and
(B) consistent with this chapter.
(b) A fraternal benefit society shall:
(1) specify in the fraternal benefit society's laws or rules those persons to whom a benefit certificate may be issued or who may be covered by benefits; and
(2) make the provision of those benefits consistent with the provision of benefits to members and their beneficiaries. (V.T.I.C. Art. 10.05, Subsecs. (a), (b).)
Sec. 885.302. ISSUANCE OF BENEFIT CONTRACTS ON VARIABLE BASIS. A fraternal benefit society may, as provided by a resolution of its supreme governing body, establish and operate one or more separate accounts and issue benefit contracts on a variable basis, subject to laws regulating a life insurance company that establishes those types of accounts and issues those types of contracts. To comply with applicable federal or state laws or rules, the society may:
(1) issue on a variable basis contracts to which Sections 885.306(b) and (c) and 885.311(a) do not apply; and
(2) adopt special procedures for conducting the business and affairs of a separate account and provide special voting and other rights for a person having beneficial interests in a separate account, including special procedures and rights relating to:
(A) investment policy;
(B) investment advisory services;
(C) selection of certified public accountants; and
(D) selection of a committee to manage the business and affairs of the account. (V.T.I.C. Art. 10.18, Subsec. (c).)
Sec. 885.303. BENEFITS FOR CHILDREN. (a) A fraternal benefit society may provide by its laws, in addition to other benefits provided for by the fraternal benefit society's laws, for insurance or annuities, or insurance and annuities, on the lives of children of any age, on the application of an adult individual related to or interested in the child, as provided by the fraternal benefit society's laws.
(b) A life insurance benefit contract issued on the life of an individual who is younger than a fraternal benefit society's minimum age for adult membership may provide for transfer of control or ownership to the insured at an age specified in the benefit certificate. A fraternal benefit society may require approval of an application for membership in order to make the transfer and may provide in all other respects for control of the benefit certificate and rights, obligations, and liabilities incident and connected to the certificate. Ownership rights under the benefit certificate before a transfer must be specified in the certificate. (V.T.I.C. Art. 10.06 (part); Art. 10.15, Subsec. (f).)
Sec. 885.304. BENEFICIARIES. (a) The owner of a benefit contract may change the beneficiary at any time in accordance with a fraternal benefit society's laws or rules unless the owner waives that right by specifically requesting in writing that the beneficiary designation be irrevocable.
(b) A fraternal benefit society may, through the fraternal benefit society's laws or rules, limit the scope of beneficiary designations and shall provide that a person whose designation as a beneficiary is revocable may not have or obtain a vested interest in the proceeds, in conformity with the benefit contract.
(c) If, at the death of an insured, a lawful beneficiary to whom the proceeds of the benefit contract are payable does not exist under the benefit contract, a fraternal benefit society shall pay the amount of the benefit under the benefit contract:
(1) to the personal representative of the insured; or
(2) if the owner of the benefit certificate is a person other than the insured, to the owner of the certificate.
(d) Subsection (c) does not apply to the extent funeral benefits may be paid under the benefit contract. (V.T.I.C. Art. 10.12-1.)
Sec. 885.305. ORGANIZATION AS BENEFICIARY. A fraternal benefit society may provide in the fraternal benefit society's laws for the issuance to its members of benefit certificates under which an association, society, or corporation that is organized and operated for religious, eleemosynary, or educational purposes is named as beneficiary. (V.T.I.C. Art. 10.14.)
Sec. 885.306. BENEFIT CERTIFICATE. (a) A fraternal benefit society may not deliver or issue for delivery in this state a benefit certificate unless the form of the certificate has been filed under Article 3.42.
(b) Each benefit certificate issued by a fraternal benefit society must:
(1) specify the amount of benefits provided under the certificate;
(2) state the amount of premiums that are payable under the certificate; and
(3) provide that the certificate, the society's charter or articles of incorporation or, if the society is a voluntary association, the society's articles of association, the fraternal benefit society's laws, the application for membership and medical examination, signed by the applicant, and all amendments to each of those constitute the agreement between the society and the member.
(c) An amendment to a fraternal benefit society's charter, articles of incorporation or association, or laws made or enacted after the issuance of a benefit certificate:
(1) binds the member and the member's beneficiaries; and
(2) controls the agreement in all respects as if the amendment had been in force at the time of the application for membership.
(d) A life, accident, health, or disability insurance benefit certificate or annuity benefit certificate issued by a fraternal benefit society must meet the requirements applicable to similar policies issued by an insurer in this state that are not inconsistent with this chapter as determined by rule of the commissioner.
(e) A copy of a document described by Subsection (b)(3), certified by a fraternal benefit society's secretary or corresponding officer, shall be admitted as evidence of the terms of the agreement between the society and the member. (V.T.I.C. Art. 10.15, Subsecs. (a), (b), (d).)
Sec. 885.307. GRACE PERIOD. A fraternal benefit society shall include in the terms of a benefit certificate a grace period of at least one month for payment of premiums. (V.T.I.C. Art. 10.15, Subsec. (c).)
Sec. 885.308. ASSIGNMENT OF LIFE INSURANCE BENEFIT CONTRACT. A fraternal benefit society may specify the terms for the assignment of a life insurance benefit contract. (V.T.I.C. Art. 10.15, Subsec. (g).)
Sec. 885.309. NONFORFEITURE BENEFITS. (a) The value of a nonforfeiture benefit provided under a benefit certificate issued before January 1, 2001, must comply with the law applicable to the certificate immediately before that date.
(b) The value of a nonforfeiture benefit provided under a benefit certificate issued on or after January 1, 2001, is computed as provided under:
(1) the provisions of Chapters 1105 and 1107 applicable to life insurance companies issuing policies containing similar benefits; and
(2) the applicable tables required by those chapters. (V.T.I.C. Art. 10.31.)
Sec. 885.310. ENFORCING PAYMENT OF PREMIUMS; CONTROL OF BENEFIT CERTIFICATES. A fraternal benefit society may provide for:
(1) enforcing payment of premiums;
(2) designating beneficiaries; and
(3) controlling benefit certificates and all rights, obligations, and liabilities incident to the certificates not in conflict with this chapter. (V.T.I.C. Art. 10.09.)
Sec. 885.311. DEFICIENCY PAYMENTS. (a) A fraternal benefit society shall provide in the fraternal benefit society's laws that if the society's reserves for any class of the society's benefit certificates become impaired, the society's supreme governing body or board of directors may require the certificate holders to pay the society an equitable proportion of the deficiency as determined by the governing body or board.
(b) If a holder of a benefit certificate does not pay a fraternal benefit society the amount determined under Subsection (a), the holder, in a manner determined by the society, may elect to accept:
(1) the amount determined under Subsection (a) as an indebtedness against the certificate, with the amount drawing interest at a rate that does not exceed the rate specified for a certificate loan under a certificate that has cash value;
(2) a proportionate reduction in the benefits payable under the certificate; or
(3) a combination of the limitations on the certificate described by Subdivisions (1) and (2).
(c) A fraternal benefit society may determine a presumed election for a holder of a benefit certificate under Subsection (b) if the holder fails to make an election. (V.T.I.C. Art. 10.30, Subsecs. (e), (f), (g).)
Sec. 885.312. CONTINUATION OF BENEFIT CERTIFICATE ON EXPULSION OR SUSPENSION OF MEMBER. If a fraternal benefit society's laws provide for expulsion or suspension of a member, the benefit certificate must provide that a member who is expelled or suspended may maintain the certificate in force by continuing payment of the required premium unless the expulsion or suspension:
(1) is for nonpayment of a premium; or
(2) occurs within the contestable period of the benefit contract and is for material misrepresentation in the application for membership or insurance. (V.T.I.C. Art. 10.15, Subsec. (e).)
Sec. 885.313. CONTINUATION OF BENEFIT CERTIFICATE ISSUED ON CHILD. If the membership in a fraternal benefit society of a person responsible for the support of a child on whose account a benefit certificate has been issued terminates, the certificate may be continued for the benefit of:
(1) the child's estate, if payment of the premiums is continued; or
(2) any other person responsible for the support and maintenance of the child, if the person assumes the payment of the required premiums. (V.T.I.C. Art. 10.11.)
Sec. 885.314. RESPONSIBILITY FOR PAYMENT OF BENEFITS. (a) An officer or member of the supreme, the grand, or any subordinate body of an incorporated fraternal benefit society is not individually liable for the payment of any disability or death benefit provided for by the fraternal benefit society's laws and contracts.
(b) Benefits are payable only out of the fraternal benefit society's funds and in the manner provided by the fraternal benefit society's laws. (V.T.I.C. Art. 10.26, Subsec. (a).)
Sec. 885.315. DAMAGES FOR FAILURE TO TIMELY PAY BENEFITS. A fraternal benefit society that is liable for a loss and that does not pay benefits before the 61st day after the date of the demand for payment is liable to the holder of the benefit certificate, in addition to the amount of the loss, for damages of 12 percent of the amount of the loss and reasonable attorney's fees for the prosecution and collection of the loss. (V.T.I.C. Art. 10.13.)
Sec. 885.316. EXEMPTION OF BENEFITS. Money or another benefit or charity to be paid or provided by a fraternal benefit society, before or after payment is not subject to attachment, garnishment, or other process and may not be seized or applied by any legal or equitable process or operation of law to pay any debt or liability of a member, a beneficiary, or any other person who may have a right under the benefit contract. (V.T.I.C. Art. 10.28.)
[Sections 885.317-885.350 reserved for expansion]
SUBCHAPTER H. AGENTS
Sec. 885.351. AGENTS. (a) A fraternal benefit society may appoint an agent licensed by the department under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code), to sell benefits listed under Section 885.301(a) to society members.
(b) A person may not solicit or procure benefit contracts for a fraternal benefit society unless the person is licensed as an agent under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code). (V.T.I.C. Art. 10.05, Subsec. (c); Art. 10.37-3, Subsec. (a).)
Sec. 885.352. EXCEPTION. (a) Section 885.351(b) does not apply to an agent, representative, or member of a fraternal benefit society who devotes less than 50 percent of the person's time to the solicitation and procurement of benefit contracts for that society.
(b) For purposes of this section, a person is presumed for a calendar year to have devoted at least 50 percent of the person's time to the solicitation or procurement of benefit contracts if, in the preceding calendar year, the person solicited or procured on behalf of a fraternal benefit society:
(1) life insurance contracts that have generated, in the aggregate, more than $20,000 of direct premiums for all lives insured;
(2) benefit contracts other than life insurance contracts that have insured the individual lives of more than 25 persons; or
(3) variable life insurance or variable annuity contracts.
(c) A person to whom this section applies may not solicit or procure on behalf of a fraternal benefit society an interest-sensitive life insurance contract that exceeds $35,000 of coverage on an individual life unless the person holds the designation of fraternal benefit counselor. (V.T.I.C. Art. 10.37-3, Subsecs. (b), (c).)
Sec. 885.353. EMPLOYMENT OF CERTAIN PERSONS TO SOLICIT BUSINESS PROHIBITED. A fraternal benefit society may not employ or otherwise retain a person to solicit business if the person has had a license revoked under Article 21.07 or 21.14, or under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code). (V.T.I.C. Art. 10.37-2.)
[Sections 885.354-885.400 reserved for expansion]
SUBCHAPTER I. REGULATION OF FRATERNAL BENEFIT SOCIETIES
Sec. 885.401. ANNUAL REPORT. (a) Each fraternal benefit society engaged in business in this state shall annually, on or before March 1:
(1) file with the department in the form required by the commissioner a statement, under oath of the society's president and secretary or corresponding officers, of:
(A) the society's condition and standing on the preceding December 31; and
(B) the society's transactions for the preceding calendar year; and
(2) provide additional information the commissioner considers necessary to demonstrate the society's business and method of operation.
(b) The commissioner may periodically require any additional statement the commissioner considers necessary relating to a fraternal benefit society.
(c) The department or the state may use the report required under Subsection (a) in determining a fraternal benefit society's financial solvency. (V.T.I.C. Art. 10.30, Subsecs. (a), (d) (part).)
Sec. 885.402. REPORTS OF CERTAIN GRAND LODGES. The officers of the supreme state governing body of a grand lodge considered to be a single state organization under Section 885.006 shall make each report required by this chapter. The report must include the transactions, liabilities, and assets of the state organization. (V.T.I.C. Art. 10.27 (part).)
Sec. 885.403. VALUATION OF BENEFIT CERTIFICATES. (a) A fraternal benefit society shall include in its report under Section 885.401 a valuation of the society's benefit certificates in force on the preceding December 31. The report of valuation shall show:
(1) as contingent liabilities, the present midyear value of the promised benefits provided by the fraternal benefit society's laws under the benefit certificates subject to valuation; and
(2) as contingent assets, the present midyear value of the future net premiums provided by the fraternal benefit society's laws as the premiums are in practice actually collected.
(b) At the option of a fraternal benefit society, instead of the valuation determined under Subsections (a)(1) and (2), the valuation may show the net value of benefit certificates subject to valuation under Subsection (a). The net value, when computed in case of monthly premiums, may be the mean of the terminal values for the end of the preceding and of the current insurance years.
(c) The valuation, including the valuation of benefit certificates, must be certified by an actuary or, at the request and expense of the fraternal benefit society, verified by the actuary of the insurance department of the society's home state.
(d) The legal minimum standard of valuation for all benefit certificates, other than benefit certificates for accident and health benefits, is computed using a mortality table and interest rate specified by Section 885.404.
(e) Each valuation report must set out clearly and fully the mortality and interest rates and the method of valuation.
(f) The report required by Section 885.401 must also include a valuation of benefit certificates in accordance with Section 885.408. (V.T.I.C. Art. 10.30, Subsec. (b) (part).)
Sec. 885.404. MORTALITY TABLES; INTEREST RATES. (a) In valuing benefit certificates under Section 885.403, a fraternal benefit society, at the option of the society, may use:
(1) the National Fraternal Congress Table of Mortality, as adopted by the National Fraternal Congress, August 23, 1899;
(2) any table producing reserves in the aggregate at least as great as the reserves produced by the table described by Subdivision (1);
(3) the Commissioners 1941 Standard Ordinary Mortality Table;
(4) the Commissioners 1958 Standard Ordinary Mortality Table; or
(5) except as provided by Subsection (e), a table based on the society's own experience of at least 20 years and covering at least 100,000 lives.
(b) Notwithstanding Subsection (a), a fraternal benefit society may value the society's benefit certificates in accordance with valuation standards otherwise authorized by state law for the valuation of similar policies issued by life insurance companies.
(c) For any category of benefit certificates issued to insure the life of a woman, a modified net premium or present value referred to in Article 3.28 may be computed according to an age not more than six years younger than the actual age of the insured.
(d) The interest assumption used with a mortality table described by Subsection (a)(1), (2), (3), or (4) may not be more than 4-1/2 percent a year. The interest assumption used with a mortality table described by Subsection (a)(5) may not be more than four percent a year.
(e) A fraternal benefit society may not use a table based on the society's own experience for a benefit certificate issued on or after January 1, 1989. (V.T.I.C. Art. 10.30, Subsec. (b) (part).)
Sec. 885.405. VALUATION OF AND SEPARATE FUND FOR DISABILITY BENEFITS. (a) A fraternal benefit society that provides for disability benefits shall keep the net premiums for disability benefits in a fund separate from all other benefit and expense funds and the valuation of all other business of the society.
(b) Notwithstanding Subsection (a), if a fraternal benefit society uses a combined premium table for both death and permanent total disability benefits:
(1) the valuation must be according to tables of reliable experience; and
(2) the society is not required to maintain a separation of those funds. (V.T.I.C. Art. 10.30, Subsec. (c).)
Sec. 885.406. PUBLICATION OF VALUATION AND CONDITION. A fraternal benefit society shall publish, in the society's official paper, a statement of:
(1) the valuation provided by Sections 885.403 and 885.405; and
(2) an explanation of the facts concerning the society's condition disclosed by that valuation. (V.T.I.C. Art. 10.30, Subsec. (d) (part).)
Sec. 885.407. SOLVENCY. A fraternal benefit society is considered solvent if its admissible assets are equal to or greater than its liabilities. (V.T.I.C. Art. 10.08 (part).)
Sec. 885.408. RESERVES FOR ACCIDENT AND HEALTH INSURANCE. (a) A fraternal benefit society shall establish reserves for the types of coverage specified by Sections 885.301(a)(4) and (5) in the same manner and to the same extent as required for a company organized under Chapter 841.
(b) Article 3.39 applies to reserve investments for a domestic fraternal benefit society. (V.T.I.C. Art. 10.07, Subsecs. (a), (b).)
Sec. 885.409. REPORTING OF RESERVES. The report of a fraternal benefit society under Section 885.401 must show as a liability the reserves required by this chapter. (V.T.I.C. Art. 10.08 (part).)
Sec. 885.410. EXAMINATION OF DOMESTIC FRATERNAL BENEFIT SOCIETIES. A domestic fraternal benefit society is subject to Articles 1.15, 1.15A, and 1.16. (V.T.I.C. Art. 10.33, Subsec. (a).)
Sec. 885.411. EXAMINATION OF FOREIGN FRATERNAL BENEFIT SOCIETIES. (a) The commissioner or a person appointed by the commissioner may examine a foreign fraternal benefit society transacting or applying for admission to engage in business in this state. The commissioner may employ assistants for this purpose.
(b) The commissioner or a person appointed by the commissioner to examine a foreign fraternal benefit society:
(1) is entitled to free access to all books, papers, and documents that relate to the business of the society; and
(2) may summon, qualify as witnesses under oath, and examine the society's officers, agents, and employees and other persons in relation to the affairs, transactions, and conditions of the society.
(c) Instead of an examination under this section, the commissioner may accept the examination of the insurance department of the state, territory, district, province, or country in which a foreign fraternal benefit society is organized.
(d) If a foreign fraternal benefit society or the society's officers refuse to permit an examination under this section or to comply with the provisions of law relating to an examination, the commissioner shall suspend the society's authority to write new business in this state or refuse the society's application for a certificate of authority. A suspension or refusal under this subsection continues until the commissioner receives satisfactory evidence relating to the condition and affairs of the society. A foreign fraternal benefit society may not write any new business in this state during a suspension under this subsection.
(e) A foreign fraternal benefit society is subject to the provisions of Articles 1.15 and 1.16 that apply to an insurer that is not organized under the laws of this state but is authorized to engage in business in this state. (V.T.I.C. Art. 10.35.)
Sec. 885.412. ADVERSE PUBLICATION PROHIBITED. (a) Pending, during, or after an examination or investigation of a fraternal benefit society, the commissioner may not make public a financial statement, report, or finding, or permit a financial statement, report, or finding affecting the status, standing, or rights of the society to become public, until:
(1) the commissioner serves a copy of the statement, report, or finding on the society at its home office; and
(2) the society has been provided a reasonable opportunity to:
(A) answer the statement, report, or finding; and
(B) make a showing in connection with the statement, report, or finding as the society desires.
(b) This section does not apply to a proceeding involving a fraternal benefit society instituted by the commissioner or the state, including an administrative hearing, a proceeding under Article 21.28 or 21.28-A, or a court proceeding. (V.T.I.C. Art. 10.36.)
Sec. 885.413. FEES. The department shall deposit fees collected under this chapter to the credit of the Texas Department of Insurance operating account. Article 1.31A applies to fees collected under this chapter. (V.T.I.C. Art. 10.01, Subsec. (a) (part).)
Sec. 885.414. REMEDIES NOT EXCLUSIVE. (a) This chapter does not prevent or limit any action by or remedy available to the department or the state under Article 21.28 or 21.28-A or other applicable law.
(b) In addition to any other provision of law relating to disciplinary action regarding a fraternal benefit society, Chapter 82 applies to a fraternal benefit society. (V.T.I.C. Art. 10.30, Subsec. (h); Art. 10.37-1.)
[Sections 885.415-885.450 reserved for expansion]
SUBCHAPTER J. CONVERSION OF FRATERNAL BENEFIT SOCIETY
Sec. 885.451. CONVERSION OF FRATERNAL BENEFIT SOCIETY TO MUTUAL OR STOCK COMPANY. (a) Subject to Subsection (b), a fraternal benefit society engaging in business in this state may convert to a mutual life insurance company or incorporated stock company by complying with this subchapter.
(b) A fraternal benefit society may not convert to a mutual life insurance company or incorporated stock company except on terms that, in the commissioner's opinion, will fully protect the rights and interests of the society's members and holders of benefit certificates. (V.T.I.C. Art. 10.40, Secs. 1, 2 (part).)
Sec. 885.452. MEETING OF LODGE REPRESENTATIVES; NOTICE. (a) The governing body of a fraternal benefit society that proposes converting to a mutual life insurance company or incorporated stock company shall call a meeting of lodge representatives. The meeting may not be held before the 90th day after the date the meeting is called.
(b) Not later than the 40th day before the date of the meeting, the fraternal benefit society shall mail to each society member or holder of a benefit certificate, at the member's or holder's mailing address as shown by the society's records, and to each lodge:
(1) notice of the meeting; and
(2) a general plan of the proposed conversion.
(c) Not later than the 20th day after the date of receipt of the notice, each lodge shall meet in a regular or called session to act on the proposal and choose a representative to the governing body for the state, if the society operates in more than one state.
(d) The lodge representatives chosen under Subsection (c) shall meet and choose the requisite number of representatives to which the state is entitled to the supreme or grand lodge, if that body is located in this state.
(e) A fraternal benefit society shall submit the plan of the proposed conversion to the commissioner, and the commissioner must approve the plan, before the society may submit the plan to the society's members, holders of benefit certificates, and lodges. (V.T.I.C. Art. 10.40, Secs. 2 (part), 3 (part).)
Sec. 885.453. RESOLUTION TO CONVERT; ADDITIONAL REQUIREMENTS. (a) As provided by the notice under Section 885.452 and after convening the supreme governing body of the fraternal benefit society, the lodge representatives shall vote on whether to adopt a resolution authorizing the conversion of the society to a mutual life insurance company or incorporated stock company. To take effect, the resolution must be approved by lodge representatives of lodges that constitute at least 60 percent of the total membership of the fraternal benefit society.
(b) The resolution authorizing the conversion must:
(1) set out or ratify a certificate of incorporation amending the fraternal benefit society's charter; and
(2) state:
(A) the society's name;
(B) the name of the new company by which the society will be known;
(C) the object of the company;
(D) the location of the company's principal office;
(E) the names of the principal officers of the company, who serve until their successors are elected and qualified; and
(F) the period, if any, of the duration of the company.
(c) If the fraternal benefit society is converting to a mutual life insurance company:
(1) the resolution authorizing the conversion must also state the amount of the unencumbered surplus;
(2) the amount and form of the unencumbered surplus must comply with Sections 882.055, 882.301(a), 882.302, 882.304, and 882.404; and
(3) the conversion must comply with Sections 882.056(a) and (b), 882.057, 882.058, 882.059, and 882.101.
(d) If the fraternal benefit society is converting to an incorporated stock company:
(1) the resolution authorizing the conversion must also state:
(A) the amount of the surplus, the amount of capital stock authorized, and the number of shares into which the capital stock is divided; and
(B) the amount of capital stock to be immediately paid in;
(2) the amounts and form of the surplus and capital must comply with Sections 841.054, 841.055, 841.056, 841.057, 841.204, 841.205, 841.301, and 841.302; and
(3) the conversion must comply with Sections 841.058, 841.059(a)(1), 841.060, 841.061, 841.062, and 841.063. (V.T.I.C. Art. 10.40, Sec. 3 (part).)
Sec. 885.454. CONVERSION DOCUMENTS. (a) A fraternal benefit society that converts to a mutual life insurance company or incorporated stock company shall file with the department:
(1) the certificate of incorporation as adopted or amended; and
(2) a report of the meeting of lodge representatives, certified by the presiding officers under the corporate seal of the fraternal benefit society.
(b) The certificate of incorporation must be incorporated in the charter of the proposed company. (V.T.I.C. Art. 10.40, Secs. 4, 5.)
Sec. 885.455. SALE OF STOCK OF CONVERTED FRATERNAL BENEFIT SOCIETY. (a) If a fraternal benefit society converts to an incorporated stock company, each holder of a benefit certificate or other member of the society has a preference right to subscribe for the proportion of the total capital stock offered for sale that the amount of the member's insurance bears to the society's total insurance in force at the time the society's supreme governing body authorizes the conversion. The right provided by this subsection expires on the 90th day after the date the society's supreme governing body authorizes the conversion.
(b) Before an incorporated stock company that is converted from a fraternal benefit society may offer any stock for public sale, the society's membership has a preference right to purchase the stock. A member may not subscribe for or purchase more than:
(1) 25 percent of the capital stock of the new company; or
(2) 10 percent of the capital stock of the new company, if there are other members applying in writing to purchase stock whose subscriptions are not filled.
(c) If the membership of a converted fraternal benefit society has not subscribed for the total capital stock authorized, the new company may permit others who were not society members at the time of the conversion to subscribe for stock and hold equal rights in the ownership of the stock.
(d) Not later than the 10th day after the date a fraternal benefit society approves a resolution authorizing the society to convert to an incorporated stock company, the society shall notify each holder of a benefit certificate or other member of:
(1) the member's right to subscribe for and purchase the stock of the incorporated stock company;
(2) the amount of stock for which the member is entitled to subscribe; and
(3) all other terms of the subscription and purchase.
(e) The notice required under Subsection (d) must be in a form approved by the department. Proof of depositing a letter addressed to each holder of a benefit certificate or other member providing the notice in the approved form is considered proof of compliance with the requirements of Subsection (d) and this subsection. (V.T.I.C. Art. 10.40, Sec. 6.)
Sec. 885.456. LEGAL EFFECT OF CONVERSION TO MUTUAL LIFE INSURANCE COMPANY. A fraternal benefit society that converts to a mutual life insurance company is subject to Chapter 882. (V.T.I.C. Art. 10.40, Sec. 3 (part).)
Sec. 885.457. COMPLETION AND LEGAL EFFECT OF CONVERSION TO STOCK COMPANY. (a) The conversion of a fraternal benefit society to an incorporated stock company is complete when the society has:
(1) complied with this subchapter and other state law regulating the incorporation of a life insurance company; and
(2) received from the commissioner its charter or certificate of authority to transact business as an incorporated stock company.
(b) A fraternal benefit society that converts to an incorporated stock company:
(1) is considered by law to have each right, privilege, power, or authority of any other stock corporation organized for engaging in the business of life insurance in this state;
(2) is subject to laws applicable to a stock corporation organized under Chapter 841 for engaging in the business of life insurance in this state;
(3) is considered by law to be a continuation of the business of the fraternal benefit society on the formation of the new company or amendment of its former charter; and
(4) succeeds to and is invested with each right, privilege, or franchise and all property of the former society, including debts due on any account and all choses in action.
(c) On conversion of a fraternal benefit society to an incorporated stock company, the title to any real estate by deed or otherwise vested in the society vests in the company, and the title is not in any way impaired because of the conversion. (V.T.I.C. Art. 10.40, Secs. 3 (part), 7.)
Sec. 885.458. CONTINUING OBLIGATIONS OF CONVERTED FRATERNAL BENEFIT SOCIETY. (a) The rights of each member, holder of a benefit certificate, or creditor and the standing of each claim against a fraternal benefit society that converts under this subchapter must be preserved unimpaired under the new corporation.
(b) Each debt, liability, and duty of a converted fraternal benefit society attaches to the new corporation and may be enforced against it to the same extent as if the debt or liability had been incurred or contracted by the new corporation.
(c) Each outstanding benefit certificate issued by a converted fraternal benefit society is a valid obligation of the new corporation without the issuance of a new certificate.
(d) A new corporation formed from a converted fraternal benefit society is obligated to perform each obligation owing by the society to a holder of a benefit certificate issued by the society. The holder may enforce a benefit certificate against the new corporation to the same extent as if the certificate had been issued by the new corporation after conversion.
(e) A pending suit in which a converted fraternal benefit society was a party is not affected by the conversion and may be prosecuted by or against the new corporation as if the conversion had not taken place. (V.T.I.C. Art. 10.40, Secs. 8, 9.)
Sec. 885.459. NAME OF CONVERTED FRATERNAL BENEFIT SOCIETY. The name of a mutual life insurance company or incorporated stock company to which a fraternal benefit society converts:
(1) must, if possible, be a continuation of the society's name; and
(2) may not, if the new company's name is changed from the society's name, be:
(A) the same as that of any other company engaging in business in this state; or
(B) a name similar to that of any other company engaging in business in this state. (V.T.I.C. Art. 10.40, Sec. 3 (part).)
Sec. 885.460. PRINCIPAL OFFICE OF CONVERTED FRATERNAL BENEFIT SOCIETY. The principal office of a mutual life insurance company or incorporated stock company created by the conversion of a fraternal benefit society under this subchapter must be located in this state. (V.T.I.C. Art. 10.40, Sec. 3 (part).)
Sec. 885.461. SOCIAL OR CHARITABLE CLUBS FORMED BY MEMBERS OF CONVERTED FRATERNAL BENEFIT SOCIETY. The members of a converted fraternal benefit society or the policyholders in the new corporation may form local clubs for social and charitable purposes. A club formed under this section:
(1) may not be connected with the management of the corporation; and
(2) does not affect the corporation's liability or the insurance in effect. (V.T.I.C. Art. 10.40, Sec. 10.)
[Sections 885.462-885.500 reserved for expansion]
SUBCHAPTER K. TERMINATION OF FRATERNAL BENEFIT SOCIETY
Sec. 885.501. DISCONTINUATION OF BUSINESS BY DOMESTIC FRATERNAL BENEFIT SOCIETY. A domestic fraternal benefit society's certificate of authority becomes void if the society:
(1) discontinues business for a period of one year; or
(2) has fewer than 400 benefit members. (V.T.I.C. Art. 10.19, Subsec. (h) (part).)
Sec. 885.502. INITIATION OF PROCEEDINGS FOR TERMINATION OF DOMESTIC FRATERNAL BENEFIT SOCIETY. (a) The commissioner may advise the attorney general of the commissioner's determination if:
(1) after examining a domestic fraternal benefit society, the commissioner determines that the society:
(A) has failed to comply with any provision of this chapter;
(B) is exceeding its powers;
(C) is not fulfilling its contracts in good faith; or
(D) is engaging in business fraudulently; or
(2) the commissioner determines that a domestic fraternal benefit society:
(A) has, for a period of at least one year, had fewer than 400 members; or
(B) has discontinued business.
(b) The attorney general shall bring an action in quo warranto against the fraternal benefit society if the attorney general determines that circumstances warrant the action. (V.T.I.C. Art. 10.33, Subsec. (b) (part).)
Sec. 885.503. ISSUANCE OF INJUNCTION AND APPOINTMENT OF RECEIVER. (a) If it appears on the trial of an action brought under Section 885.502(b) that the fraternal benefit society should be closed, the court shall:
(1) enjoin the society from engaging in further business; and
(2) appoint a receiver for the society.
(b) A receiver appointed under Subsection (a)(2) shall:
(1) immediately take possession of the books, papers, money, and other assets of the fraternal benefit society; and
(2) promptly, under the court's direction, proceed to close the society's affairs and distribute its funds to the persons entitled to those funds.
(c) A court in this state may not hear an application for an injunction against or proceedings for the dissolution of or the appointment of a receiver for a domestic fraternal benefit society or lodge unless the attorney general makes the application or brings the proceedings. (V.T.I.C. Art. 10.33, Subsec. (b) (part); Art. 10.34.)
[Sections 885.504-885.700 reserved for expansion]
SUBCHAPTER O. CRIMINAL PENALTIES
Sec. 885.701. FALSE STATEMENTS; CRIMINAL PENALTY. (a) A person commits an offense if the person wilfully makes a false or fraudulent statement or representation:
(1) in or with reference to an application for membership in a fraternal benefit society authorized to engage in business in this state; or
(2) for the purpose of obtaining money from or benefits in a fraternal benefit society transacting business under this chapter.
(b) An offense under this section is a misdemeanor punishable by:
(1) a fine of not less than $100 or more than $500;
(2) confinement in jail for not less than 30 days or more than one year; or
(3) both the fine and confinement. (V.T.I.C. Art. 10.41.)
Sec. 885.702. SOLICITING MEMBERSHIP IN UNAUTHORIZED FRATERNAL BENEFIT SOCIETY; CRIMINAL PENALTY. (a) A person commits an offense if the person solicits membership for or in any manner assists in procuring membership in a fraternal benefit society that is not authorized to transact business in this state.
(b) An offense under this section is a misdemeanor punishable by a fine of not less than $50 or more than $200. (V.T.I.C. Art. 10.42.)
Sec. 885.703. SOLICITING MEMBERSHIP IN LODGE OF UNAUTHORIZED FRATERNAL BENEFIT SOCIETY; CRIMINAL PENALTY. (a) A person commits an offense if the person solicits for or organizes a lodge of a fraternal benefit society without first obtaining from the commissioner a certificate of authority that entitles the society to engage in business in this state.
(b) An offense under this section is a misdemeanor punishable by:
(1) a fine of not less than $100 or more than $250;
(2) confinement in jail for not less than three months or more than six months; or
(3) both the fine and confinement. (V.T.I.C. Art. 10.43.)
Sec. 885.704. EXCEPTION TO SOLICITATION OFFENSES. Sections 885.702 and 885.703 do not:
(1) prohibit a member of an existing lodge from soliciting a person to become a member of the lodge; or
(2) apply to a member of a lodge who participates in, directs, or conducts the organization or establishment of a lodge within the limits of the county in which the person resides or of the person's lodge district. (V.T.I.C. Art. 10.44.)
Sec. 885.705. GENERAL CRIMINAL PENALTY. (a) An officer, agent, or employee of a domestic fraternal benefit society commits an offense if the person neglects, refuses to comply with, or violates any provision of the laws of this state governing domestic fraternal benefit societies.
(b) An offense under this section is a misdemeanor punishable by a fine not to exceed $200. (V.T.I.C. Art. 10.45 (part).)
Sec. 885.706. OTHER PENALTIES. Notwithstanding Section 885.705, if another section of this chapter provides a penalty for a violation of the section, the penalty provided in the other section prevails. (V.T.I.C. Art. 10.45 (part).)
CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 886.001. DEFINITION
Sec. 886.002. APPLICABILITY OF CHAPTER; EXEMPTIONS
Sec. 886.003. LIMITED EXEMPTION FROM INSURANCE LAWS
Sec. 886.004. ORGANIZATION OF NEW ASSOCIATION
PROHIBITED
[Sections 886.005-886.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 886.051. OPERATION UNDER CERTIFICATE OF AUTHORITY
Sec. 886.052. COMPLIANCE WITH LAW REQUIRED
[Sections 886.053-886.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION
Sec. 886.101. GENERAL POWERS OF ASSOCIATION
Sec. 886.102. APPLICABILITY OF TEXAS NON-PROFIT
CORPORATION ACT
Sec. 886.103. ARTICLES OF ASSOCIATION, CONSTITUTION, AND
BYLAWS
Sec. 886.104. BENEFITS AUTHORIZED
Sec. 886.105. TERRITORIAL LIMITATIONS
Sec. 886.106. CONNECTION WITH OTHER ASSOCIATIONS
PROHIBITED
Sec. 886.107. ANNUAL STATEMENT; FILING FEE
Sec. 886.108. SURETY BOND
Sec. 886.109. VOLUNTARY DISSOLUTION
Sec. 886.110. AUTOMATIC DISSOLUTION
[Sections 886.111-886.700 reserved for expansion]
SUBCHAPTER O. DISCIPLINARY PROCEDURES AND CRIMINAL PENALTY
Sec. 886.701. REVOCATION
Sec. 886.702. GROUNDS FOR DISSOLUTION OR FORFEITURE
Sec. 886.703. CRIMINAL PENALTY
CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 886.001. DEFINITION. In this chapter, "local mutual aid association" means an entity authorized under this chapter to engage in the business of insurance and pay benefits with money provided by assessments on the members as needed, including a burial association described by Section 888.001. (V.T.I.C. Art. 12.01 (part).)
Sec. 886.002. APPLICABILITY OF CHAPTER; EXEMPTIONS. (a) Except as provided by Subsection (b), this chapter and Chapters 887 and 888 apply to local mutual aid associations.
(b) This chapter does not apply to the following entities unless the entity is a burial association described by Section 888.001:
(1) a labor union, domestic order, or association that does not provide a death benefit of more than $150;
(2) an association described by Section 885.004; or
(3) any society or association operating before March 21, 1929, statewide on an assessment basis under a charter granted under another statute of this state. (V.T.I.C. Arts. 12.01 (part), 12.16.)
Sec. 886.003. LIMITED EXEMPTION FROM INSURANCE LAWS. A local mutual aid association is subject only to this chapter and Chapters 887 and 888. Except as otherwise provided by this chapter, a local mutual aid association is exempt from all other insurance laws of this state, unless a local mutual aid association is expressly designated in the law. (V.T.I.C. Art. 12.12 (part).)
Sec. 886.004. ORGANIZATION OF NEW ASSOCIATION PROHIBITED. A new local mutual aid association may not be organized under this chapter. (V.T.I.C. Art. 22.21.)
[Sections 886.005-886.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 886.051. OPERATION UNDER CERTIFICATE OF AUTHORITY. A local mutual aid association engages in business under a certificate of authority issued by the department. (V.T.I.C. Art. 12.05 (part).)
Sec. 886.052. COMPLIANCE WITH LAW REQUIRED. An individual, firm, or corporation may not engage in business in this state as a local mutual aid society or association that pays a death benefit or other benefit and that pays benefits with money provided by assessments made as necessary unless the individual, firm, or corporation is acting in accordance with this chapter or another law of this state. (V.T.I.C. Art. 12.02 (part).)
[Sections 886.053-886.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION
Sec. 886.101. GENERAL POWERS OF ASSOCIATION. A local mutual aid association is a body corporate that may sue and be sued in its own name and exercise the other powers and functions specifically granted in this chapter, but not otherwise. (V.T.I.C. Art. 12.12 (part).)
Sec. 886.102. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (a) Except to the extent of any conflict with this code, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a local mutual aid association. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to local mutual aid associations.
(b) On advance approval of the commissioner, a local mutual aid association may pay dividends to its members. (V.A.C.S. Art. 1396-10.04, Sec. B (part).)
Sec. 886.103. ARTICLES OF ASSOCIATION, CONSTITUTION, AND BYLAWS. (a) The articles of association of a local mutual aid association must state:
(1) the name of the association, which must be distinctly different from other associations operating in the same area;
(2) the purpose for which the association is created, including the upper and lower age limits of individuals to whom benefit certificates may be issued;
(3) the location of the principal office of the association;
(4) the territory in which the association will engage in business;
(5) the titles of the officers of the association; and
(6) the number of directors of the association.
(b) The constitution and bylaws of the association may not violate, and must be in harmony with, this chapter. (V.T.I.C. Arts. 12.05 (part), 12.08 (part).)
Sec. 886.104. BENEFITS AUTHORIZED. (a) Except as provided by Subsection (b), a local mutual aid association may provide only for the payment of death benefits. An association may not provide for old age benefits or benefits for accidental injury or sickness.
(b) A local mutual aid association organized before March 21, 1929, that provides for the payment of death, old age, and accident benefits may continue to provide those benefits.
(c) The policy issued by the association must clearly state the benefits provided.
(d) A local mutual aid association may not issue a certificate providing for:
(1) a level premium;
(2) guaranteed benefits; or
(3) surrender of loan values. (V.T.I.C. Arts. 12.09, 12.10.)
Sec. 886.105. TERRITORIAL LIMITATIONS. (a) A local mutual aid association may conduct business in any county in this state.
(b) If the articles of association of an association provide that the association engages in business only in a limited territory, the association may amend the articles to permit statewide business. After the amendment, the association is entitled to receive a certificate of authority permitting statewide business. (V.T.I.C. Art. 12.03.)
Sec. 886.106. CONNECTION WITH OTHER ASSOCIATIONS PROHIBITED. (a) A local mutual aid association may not have any connection with another local mutual aid association.
(b) An association may not contribute any form of salary or compensation to an executive officer of another association. (V.T.I.C. Art. 12.04.)
Sec. 886.107. ANNUAL STATEMENT; FILING FEE. (a) The department shall charge the appropriate fee for each annual statement. The fee must be:
(1) payable to the department; and
(2) deposited in the Texas Department of Insurance operating account.
(b) Article 1.31A applies to the fee. (V.T.I.C. Art. 12.18.)
Sec. 886.108. SURETY BOND. (a) A local mutual aid association's officer responsible for the funds of the association shall file with the department a surety bond.
(b) The surety bond must be:
(1) executed by a surety company authorized to do business in this state;
(2) satisfactory to the department; and
(3) payable in an amount and conditioned as specified by Section 887.054.
(c) This section does not apply to a local mutual aid association that:
(1) has a total membership of 1,000 or fewer members;
(2) charges $1 or less each for annual dues or assessments; and
(3) charges $2.50 or less for a membership fee.
(d) An association exempted under Subsection (c) shall file with the department a bond in the amount of $1,000 and conditioned as provided by Section 887.054. (V.T.I.C. Art. 12.05 (part).)
Sec. 886.109. VOLUNTARY DISSOLUTION. A local mutual aid association may dissolve by vote of the majority of the members at:
(1) a regular meeting called by the secretary; or
(2) a special meeting called for the purpose of considering dissolution. (V.T.I.C. Art. 12.13 (part).)
Sec. 886.110. AUTOMATIC DISSOLUTION. A local mutual aid association is dissolved automatically and forfeits its right to engage in the business of insurance if:
(1) the association's membership falls below 25 percent of the maximum value of the policy issued; or
(2) the association's membership falls below 50 percent of the maximum value of the policy issued and the association fails to notify each member of the amount paid on the preceding death claim when assessment is made. (V.T.I.C. Art. 12.13 (part).)
[Sections 886.111-886.700 reserved for expansion]
SUBCHAPTER O. DISCIPLINARY PROCEDURES AND CRIMINAL PENALTY
Sec. 886.701. REVOCATION. Except as otherwise provided by law, the department may revoke the right of a local mutual aid association to engage in the business of insurance in this state only on:
(1) the judgment of a court;
(2) the filing of articles of dissolution by the members of the association or by the officers on behalf of the members; or
(3) a filing showing that the association's membership has been merged and taken over by another association. (V.T.I.C. Art. 12.11.)
Sec. 886.702. GROUNDS FOR DISSOLUTION OR FORFEITURE. (a) In addition to any other penalties imposed on a local mutual aid association or on its members or officers, an association is subject to dissolution and forfeiture of its right to engage in the business of insurance if the association:
(1) ceases to engage in the business of insurance;
(2) falls below the requirements of this chapter;
(3) engages in the business of insurance without a certificate of authority;
(4) fails to make reports as required by law;
(5) refuses to submit to examination by the department or pay the cost of an examination;
(6) engages in the business of insurance in a fraudulent, illegal, or dishonest manner; or
(7) violates this chapter.
(b) The attorney general shall, at the request of the department, file any action necessary to wind up the affairs of an association to which Subsection (a) applies and provide for the appointment of a receiver if necessary.
(c) An action under this section must be brought in Travis County. (V.T.I.C. Art. 12.14.)
Sec. 886.703. CRIMINAL PENALTY. (a) A person commits an offense if the person violates this chapter.
(b) An offense under this section is a misdemeanor punishable by a fine not to exceed $500. (V.T.I.C. Art. 12.15.)
CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN
MUTUAL ASSESSMENT COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 887.001. DEFINITIONS
Sec. 887.002. PURPOSE
Sec. 887.003. APPLICABILITY OF CHAPTER
Sec. 887.004. INAPPLICABILITY TO CERTAIN
ORGANIZATIONS OF MEMBERS OF RELIGIOUS
DENOMINATION
Sec. 887.005. DEPARTMENT OF PUBLIC SAFETY EMPLOYEE
MUTUAL ASSOCIATION
Sec. 887.006. CONSTRUCTION
Sec. 887.007. DEPOSIT OF FEES
Sec. 887.008. INTERPRETATION OF CHAPTER BY
COMMISSIONER
Sec. 887.009. RULES
[Sections 887.010-887.050 reserved for expansion]
SUBCHAPTER B. GENERAL POWERS AND DUTIES; OFFICERS
AND DIRECTORS
Sec. 887.051. BYLAWS
Sec. 887.052. AMENDMENT OF BYLAWS
Sec. 887.053. IMMUNITY
Sec. 887.054. FINANCIAL OFFICER; BOND
Sec. 887.055. BOND REQUIREMENTS FOR CERTAIN PERSONS
Sec. 887.056. RECOVERY ON BOND
Sec. 887.057. DEPOSIT
Sec. 887.058. CHANGE OF ASSOCIATION'S NAME
Sec. 887.059. BOOKS AND RECORDS
Sec. 887.060. ANNUAL STATEMENT
Sec. 887.061. REPORT ON CONDITION OF ASSOCIATION
Sec. 887.062. EXAMINATION
Sec. 887.063. ADMITTED ASSETS
Sec. 887.064. DIVIDENDS
Sec. 887.065. MERGER
[Sections 887.066-887.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 887.101. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 887.102. EXEMPT ASSOCIATION; PERMIT
Sec. 887.103. REFUSAL OF CERTIFICATE OF AUTHORITY OR
PERMIT
Sec. 887.104. REFUSAL OR REMOVAL FOR UNWORTHINESS OF
PUBLIC TRUST
[Sections 887.105-887.150 reserved for expansion]
SUBCHAPTER D. MEMBERS
Sec. 887.151. CLASSES OF MEMBERS
Sec. 887.152. QUALIFYING MEMBERSHIP IN ASSOCIATION
Sec. 887.153. VOTING RIGHTS OF MEMBERS
Sec. 887.154. MEMBERSHIP RECORDS
Sec. 887.155. TRANSFER OF MEMBERSHIP OR MERGER
OF CLASSES
[Sections 887.156-887.200 reserved for expansion]
SUBCHAPTER E. POWERS AND DUTIES RELATING TO INSURANCE
AND COVERAGES
Sec. 887.201. LIMIT ON LIFE INSURANCE
Sec. 887.202. STIPULATED PREMIUM PLAN; DEDUCTION OF UNPAID
PREMIUM BALANCE
Sec. 887.203. ISSUANCE OF LIFE INSURANCE POLICY BY
CERTAIN ASSOCIATIONS
Sec. 887.204. RENEWAL OR REINSTATEMENT OF INSURANCE
CERTIFICATE
Sec. 887.205. LIFE INSURANCE CERTIFICATE BENEFICIARIES
Sec. 887.206. PAYMENT OF CLAIM; PROOF OF CLAIM
Sec. 887.207. EXCEPTION TO FULL PAYMENT
REQUIREMENT: ASSESSMENT-AS-NEEDED
ASSOCIATIONS
Sec. 887.208. CONTESTED CLAIMS
Sec. 887.209. VENUE
Sec. 887.210. REINSURANCE
[Sections 887.211-887.250 reserved for expansion]
SUBCHAPTER F. CONTENTS OF APPLICATIONS
AND INSURANCE CERTIFICATES
Sec. 887.251. GENERAL REQUIREMENTS FOR INSURANCE
CERTIFICATE AND APPLICATION FORMS;
INCONTESTABILITY
Sec. 887.252. APPLICATION FOR INSURANCE CERTIFICATE
Sec. 887.253. LIFE INSURANCE CERTIFICATE FORMS
Sec. 887.254. HEALTH AND ACCIDENT INSURANCE CERTIFICATE
FORMS
Sec. 887.255. INSURANCE BENEFIT REDUCTIONS AND
EXCLUSIONS
Sec. 887.256. FORM APPROVAL
[Sections 887.257-887.300 reserved for expansion]
SUBCHAPTER G. ASSESSMENTS AND REVENUE
Sec. 887.301. ASSESSMENTS REQUIRED
Sec. 887.302. AUTHORITY TO INCREASE ASSESSMENT RATES
ON CERTAIN INSURANCE CERTIFICATES
Sec. 887.303. APPROVAL REQUIRED FOR CERTAIN RATE
INCREASES
Sec. 887.304. LIMIT ON RATE INCREASES
Sec. 887.305. EXPENSE LOADING ON CERTAIN INSURANCE
CERTIFICATES
Sec. 887.306. ASSESSMENT-AS-NEEDED ASSOCIATIONS:
PAYMENTS ON CERTAIN INSURANCE
CERTIFICATES
Sec. 887.307. REVENUE OF ASSOCIATION; DEPOSIT
Sec. 887.308. SUSPENSION OF MEMBER FOR NONPAYMENT
Sec. 887.309. FAILURE TO COMPLY WITH CERTAIN COMMISSIONER
ORDERS
[Sections 887.310-887.350 reserved for expansion]
SUBCHAPTER H. CLAIM AND EXPENSE FUNDS
Sec. 887.351. CLAIM AND EXPENSE FUNDS
Sec. 887.352. LIMITS ON USE OF FUNDS
Sec. 887.353. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE
CERTIFICATES
Sec. 887.354. DIVISION OF FUNDS: ACCIDENT AND HEALTH
INSURANCE CERTIFICATES AND CERTAIN LIFE
INSURANCE CERTIFICATES
Sec. 887.355. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE
CERTIFICATES WITH NO RATE INCREASE
Sec. 887.356. DIVISION OF FUNDS: ASSESSMENT-AS-NEEDED
ASSOCIATIONS
Sec. 887.357. INVESTMENT OF FUNDS
Sec. 887.358. PAYMENT OF TAXES ON CLAIM FUND INCOME
Sec. 887.359. PAYMENT OF REINSURANCE PREMIUM
Sec. 887.360. COST OF DEFENDING CONTESTED CLAIMS
[Sections 887.361-887.400 reserved for expansion]
SUBCHAPTER I. RESERVES
Sec. 887.401. RESERVES ON INDIVIDUAL LIFE INSURANCE
CERTIFICATES
Sec. 887.402. RESERVES ON FAMILY GROUP LIFE INSURANCE
CERTIFICATES
Sec. 887.403. ISSUE YEAR AND ISSUE AGE IN CERTAIN
INSURANCE CERTIFICATES
Sec. 887.404. RESERVES ON ACCIDENT AND HEALTH INSURANCE
CERTIFICATES
Sec. 887.405. COMPUTATION OF RESERVE LIABILITY
Sec. 887.406. INCREASE OF RESERVES
Sec. 887.407. NONAPPLICABILITY TO ASSESSMENT-AS-NEEDED
ASSOCIATIONS
[Sections 887.408-887.450 reserved for expansion]
SUBCHAPTER J. CONVERSION TO LEGAL RESERVE INSURANCE COMPANY
Sec. 887.451. AUTHORIZATION TO CONVERT OR REINSURE
Sec. 887.452. PROPOSAL FOR CONVERSION OR REINSURANCE
Sec. 887.453. MEMBERS MEETING; NOTICE
Sec. 887.454. MEMBERS MEETING; PROCEDURES
Sec. 887.455. COMPLETION AND LEGAL EFFECT OF CONVERSION OR
REINSURANCE
Sec. 887.456. CONTINUING OBLIGATIONS OF CONVERTED OR REINSURED
ASSOCIATION
Sec. 887.457. DISBURSEMENT OF CLAIM FUND
[Sections 887.458-887.500 reserved for expansion]
SUBCHAPTER K. CONVERSION TO STOCK LEGAL RESERVE LIFE
INSURANCE COMPANY
Sec. 887.501. APPLICABILITY OF SUBCHAPTER
Sec. 887.502. AUTHORIZATION TO CONVERT
Sec. 887.503. APPROVAL BY MEMBERSHIP
Sec. 887.504. AMENDMENT OF CHARTER OR ARTICLES OF
ASSOCIATION REQUIRED
Sec. 887.505. EXCHANGE OF INSURANCE CERTIFICATES; RESERVES
Sec. 887.506. COMPLETION OF CONVERSION
Sec. 887.507. LEGAL EFFECT OF CONVERSION
Sec. 887.508. EXEMPTION FROM CAPITAL AND SURPLUS
REQUIREMENTS
Sec. 887.509. LIMITS ON OPERATION OF CONVERTED ASSOCIATION
Sec. 887.510. INCREASE OF CAPITAL AND SURPLUS REQUIRED
[Sections 887.511-887.550 reserved for expansion]
SUBCHAPTER L. SUPERVISORY INTERVENTION; INSOLVENCY
Sec. 887.551. NOTICE OF INSOLVENCY, HAZARD, NONCOMPLIANCE
WITH LAW, OR INSUFFICIENT MEMBERSHIP
Sec. 887.552. COMPLIANCE WITH NOTICE REQUIREMENTS
Sec. 887.553. FAILURE TO COMPLY
Sec. 887.554. COMMISSIONER'S ACTION WHEN ASSOCIATION
CANNOT CONTINUE BUSINESS
Sec. 887.555. ACTION BY ATTORNEY GENERAL
Sec. 887.556. REPORT TO ATTORNEY GENERAL
Sec. 887.557. LIMIT ON MERGER OR TRANSFER OF MEMBERSHIP
Sec. 887.558. COST OF CONSERVATOR'S SERVICES
[Sections 887.559-887.700 reserved for expansion]
SUBCHAPTER O. PENALTIES
Sec. 887.701. UNLAWFUL CONVERSION; CRIMINAL PENALTY
Sec. 887.702. DIVERSION OF SPECIAL FUNDS; CRIMINAL
PENALTY
Sec. 887.703. APPROPRIATION OF MONEY; CRIMINAL PENALTY
Sec. 887.704. VIOLATION OF COMMISSIONER ORDER; CRIMINAL
PENALTY
Sec. 887.705. OTHER VIOLATIONS; CRIMINAL PENALTY
CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN
MUTUAL ASSESSMENT COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 887.001. DEFINITIONS. In this chapter:
(1) "Assessment" means any money or thing of value, including premiums, paid in consideration of insurance provided by an insurance certificate.
(2) "Association" means an organization subject to this chapter.
(3) "Claim fund" includes a mortuary fund, relief fund, or similar fund.
(4) "Insurance certificate" means an insurance policy, contract of insurance, certificate of membership, or other document through which insurance is effected or evidenced.
(5) "Member" includes a certificate holder or any other insured of an association.
(6) "Membership fee" means the amount of the first assessment or assessments placed in the expense fund of an association and representing the cost of soliciting or procuring a member, as permitted by the department. (V.T.I.C. Art. 14.02 (part); New.)
Sec. 887.002. PURPOSE. The primary purpose of this chapter and Chapter 888 is to secure to members and the beneficiaries of members the full and prompt payment of all claims, according to the maximum benefit provided under the insurance certificate. (V.T.I.C. Art. 14.29 (part).)
Sec. 887.003. APPLICABILITY OF CHAPTER. (a) This chapter governs:
(1) local mutual aid associations;
(2) statewide mutual life associations;
(3) life, health, and accident associations;
(4) mutual assessment life, health, and accident associations;
(5) burial associations; and
(6) similar entities.
(b) Except as provided by Section 887.004, this chapter applies to insurance companies and associations, whether incorporated or not:
(1) that issue policies or certificates of insurance on the lives of individuals on a mutual assessment plan or that provide health and accident benefits on a mutual assessment plan or whose funds are derived from assessments on certificate holders or members; and
(2) that are not governed by:
(A) Chapter 841, 861, 882, 883, 885, 941, or 942; or
(B) Chapter 5, Title 78, Revised Statutes, as provided by Section 18, Chapter 40, Acts of the 41st Legislature, 1st Called Session, 1929, as amended by Section 1, Chapter 60, General Laws, Acts of the 41st Legislature, 2nd Called Session, 1929.
(c) This chapter does not apply to mutual fire insurance companies. (V.T.I.C. Arts. 14.01 (part), 14.03 (part), 14.54.)
Sec. 887.004. INAPPLICABILITY TO CERTAIN ORGANIZATIONS OF MEMBERS OF RELIGIOUS DENOMINATION. This chapter does not apply to an association that:
(1) is not operated for profit;
(2) is composed only of the members of a particular religious denomination;
(3) does not provide insurance benefits in an amount greater than $1,000 on any one individual; and
(4) does not pay any officer of the association a salary greater than $100 a month. (V.T.I.C. Art. 14.01 (part).)
Sec. 887.005. DEPARTMENT OF PUBLIC SAFETY EMPLOYEE MUTUAL ASSOCIATION. Notwithstanding any other provision of this chapter, a mutual association for employees of the Department of Public Safety may provide coverage and benefits to retired officers and employees of that department. (V.T.I.C. Art. 14.17A.)
Sec. 887.006. CONSTRUCTION. (a) This chapter does not:
(1) enlarge the powers or rights of any association;
(2) enlarge the scope of an association's legal or corporate existence; or
(3) authorize the creation of any association or corporation to engage in the business of insurance described by Section 887.003(b) if that creation is not specifically permitted by law.
(b) The laws prohibiting or limiting creation of an association and the exercise of corporate power are not affected by this chapter. (V.T.I.C. Art. 14.01 (part).)
Sec. 887.007. DEPOSIT OF FEES. The department shall deposit a fee collected under this chapter to the credit of the Texas Department of Insurance operating account. (V.T.I.C. Art. 14.60 (part).)
Sec. 887.008. INTERPRETATION OF CHAPTER BY COMMISSIONER. If a provision of this chapter appears obscure when applied to health, accident, or disability provisions in an insurance certificate issued by an association authorized to issue health, accident, or disability certificates, the commissioner shall interpret the provision in accordance with the expressed purpose of this chapter and looking to the full payment of claims and preserving to members the benefit of the association's protection. (V.T.I.C. Art. 14.36.)
Sec. 887.009. RULES. The commissioner may adopt reasonable rules to implement the purposes of this chapter. (V.T.I.C. Art. 14.39.)
[Sections 887.010-887.050 reserved for expansion]
SUBCHAPTER B. GENERAL POWERS AND DUTIES; OFFICERS
AND DIRECTORS
Sec. 887.051. BYLAWS. (a) An association shall submit to the department a copy of the association's bylaws. The department shall examine the bylaws and approve the bylaws if they comply with this chapter. The association shall conform the bylaws to this chapter if they are not in compliance.
(b) On approval of the bylaws under Subsection (a), an association shall file with the department a copy of the bylaws certified by the president or general manager and the secretary of the association.
(c) An association's bylaws may not contain any provision in conflict with this chapter.
(d) An association's bylaws must provide for periodic and special meetings of the membership. (V.T.I.C. Art. 14.04 (part).)
Sec. 887.052. AMENDMENT OF BYLAWS. (a) A majority of an association's members present at a regular meeting or at a meeting called for the purpose may amend the association's bylaws.
(b) An association shall mail to all members notice of any regular or special meeting at which amendments to bylaws will be considered. The notice must contain:
(1) a complete copy of the proposed amendments; and
(2) a fair explanation of the intent and effect of the proposed amendments.
(c) An amendment must be ratified by the association's board of directors.
(d) An association shall file with the department, in the same manner provided for filing bylaws under Section 887.051, an amendment adopted by the association. An amendment is not effective unless approved by the department.
(e) An association shall mail to each member a certified copy of any amendment to the association's bylaws at the next assessment after the amendment to the bylaws is made.
(f) On adoption of an amendment to an association's bylaws that might affect the insurance rights of the association's members, the association shall immediately send a copy of the amendment by first class mail to each affected member. The burden of proof is on the association to prove that the association mailed the amendment. (V.T.I.C. Arts. 14.04 (part), 14.05, 14.18 (part).)
Sec. 887.053. IMMUNITY. An officer, director, or member of an association is not individually liable because of an insurance certificate issued by the association or a claim arising from an insurance certificate. (V.T.I.C. Art. 14.03 (part).)
Sec. 887.054. FINANCIAL OFFICER; BOND. (a) An association, by resolution entered in its minutes, shall designate an officer to be responsible for handling the association's funds. The president, secretary, or general manager of the association must certify a copy of the resolution, and the association shall file the copy with the department.
(b) Except as provided by Subsection (c) or (d), the association shall make and file a surety bond covering the officer designated under Subsection (a). The bond must:
(1) be issued by a corporate surety company authorized to issue surety bonds in this state;
(2) be satisfactory to the department and payable to the department for the use and benefit of the association;
(3) obligate the principal and surety to pay any monetary loss to the association through an act of fraud, dishonesty, forgery, theft, embezzlement, or wilful misapplication by the officer, whether acting alone or with other persons, while employed as or exercising the powers of an officer designated under Subsection (a); and
(4) be in an amount of:
(A) at least $2,500; or
(B) if the association's claim fund exceeds $2,500, an amount equal to the lesser of:
(i) the amount of the association's claim fund; or
(ii) $20,000.
(c) Instead of the bond required by Subsection (b), the officer designated under Subsection (a) may deposit with the department cash or securities approved by the department in the amount and subject to the conditions applicable to the bond.
(d) Except as provided by Subsection (e), this section does not apply to a local mutual aid association that was operating on May 12, 1939, and has never:
(1) had a total membership of more than 1,000 members;
(2) charged more than $1 each for annual dues and assessments; and
(3) charged more than $2.50 for membership fees.
(e) An association to which Subsection (d) applies must file with the department a bond in the amount of $1,000, conditioned as provided for a bond under Subsection (b).
(f) Successive recoveries may be made on a bond under this section until the amount of the bond is exhausted. (V.T.I.C. Art. 14.08 (part).)
Sec. 887.055. BOND REQUIREMENTS FOR CERTAIN PERSONS. (a) In addition to the bond required by Section 887.054 and any other bond required by law, an association shall obtain a separate or blanket surety bond covering each other person who may have access to the association's claim funds. The bond must:
(1) be issued by a surety authorized by the department to engage in business in this state;
(2) be payable to the department for the use and benefit of the association;
(3) obligate the principal and surety to pay any monetary loss to the association through an act of fraud, dishonesty, forgery, theft, embezzlement, or wilful misapplication by a covered person, whether acting alone or with other persons; and
(4) be in an amount determined by the department of at least $1,000 but not more than $5,000.
(b) Successive recoveries may be made on a bond under this section until the amount of the bond is exhausted. (V.T.I.C. Art. 14.08 (part).)
Sec. 887.056. RECOVERY ON BOND. (a) On receipt of information that an officer of an association has violated the terms of a bond under Section 887.054 or 887.055, the department shall demand from the officer a written explanation of the charge.
(b) If after an explanation under Subsection (a) the department is not satisfied regarding the existing facts in controversy, the department shall:
(1) notify the officer to appear in Travis County, not earlier than the 11th day or later than the 16th day after service of notice, with any records and other information the department considers proper; and
(2) conduct an examination into the charge against the officer.
(c) If after an examination under Subsection (b) the department is satisfied that the officer violated the terms of the bond, the department shall:
(1) immediately notify the company executing the bond;
(2) prepare a written statement covering the facts; and
(3) deliver the statement to the attorney general.
(d) On receipt of a statement under Subsection (c), the attorney general shall investigate the charges. If the attorney general is satisfied that the officer violated the terms of the bond, the attorney general shall:
(1) enforce the liability against the cash or securities provided as surety by the officer; or
(2) in the name of the commissioner, file suit in Travis County on the bond for the benefit of the bond's beneficiaries against the officer as principal and the sureties for the recovery of:
(A) any amounts due by the officer; and
(B) all costs of the suit. (V.T.I.C. Art. 14.09.)
Sec. 887.057. DEPOSIT. (a) An association shall, through the department, deposit with the comptroller an amount equal to the largest risk assumed by the association on any one life or individual.
(b) A deposit under this section must be cash or convertible securities subject to approval by the department.
(c) A deposit is liable for the payment of any final judgment against the association and is subject to garnishment after a final judgment against the association.
(d) An association shall immediately replenish a deposit under this section if the deposit is impounded or depleted. If the association fails to immediately replenish the deposit on demand by the department, the department may consider the association insolvent and take appropriate action.
(e) An association may not state in an advertisement, in a letter, in literature, or otherwise that it has made a deposit with the department as required by law, unless the association also states fully:
(1) the purpose of the deposit;
(2) the conditions under which the deposit is made; and
(3) the exact amount and character of the deposit. (V.T.I.C. Art. 14.10.)
Sec. 887.058. CHANGE OF ASSOCIATION'S NAME. An association may change its name by amending the association's charter if:
(1) the association submits the proposed amendment to the department for approval; and
(2) the department does not determine that the proposed name is confusing and misleading to the public. (V.T.I.C. Art. 14.14.)
Sec. 887.059. BOOKS AND RECORDS. (a) An association shall keep the association's books and records in a form and manner that:
(1) accurately reflects the condition of the association or the facts essential to the association's faithful and effective operation; and
(2) is acceptable to the department.
(b) The association shall adopt forms or systems that are acceptable to the department and will most effectively serve the purpose described by Subsection (a)(1). (V.T.I.C. Art. 14.12.)
Sec. 887.060. ANNUAL STATEMENT. (a) Not later than April 1 of each year, an association shall file with the department a sworn statement of the association's condition on the preceding December 31.
(b) A statement under this section must be on a form provided by the department for that purpose and include a complete account of:
(1) the association's real and contingent assets;
(2) the association's liabilities; and
(3) income to and disbursements from the association's claim and expense funds during the year. (V.T.I.C. Art. 14.15, Sec. 1 (part).)
Sec. 887.061. REPORT ON CONDITION OF ASSOCIATION. The department may require from an association written reports on the condition of the association at any time the department considers advisable. The department may require that a report be verified by the oath of a responsible officer of the association. (V.T.I.C. Art. 14.57 (part).)
Sec. 887.062. EXAMINATION. Articles 1.15 and 1.16 apply to an association. (V.T.I.C. Art. 14.16.)
Sec. 887.063. ADMITTED ASSETS. An association may include among its admitted assets, within the assets of the expense fund only, any asset designated as a net asset under Section 841.004. (V.T.I.C. Art. 3.01, Sec. 10(d) (part).)
Sec. 887.064. DIVIDENDS. If the amount of an association's claim fund exceeds the amount of reserves required by Subchapter I, the association may pay dividends from the fund to its certificate holders. The amount of the dividends and the method of distribution of the dividends must be:
(1) equitable and nondiscriminatory; and
(2) approved by the department before payment. (V.T.I.C. Art. 14.15, Sec. 8.)
Sec. 887.065. MERGER. (a) An association may not merge with another association without the advance approval of the department.
(b) The department may grant approval under Subsection (a) only after the department:
(1) completely investigates the facts; and
(2) determines that the proposed merger is to the advantage of the members. (V.T.I.C. Art. 14.13 (part).)
[Sections 887.066-887.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 887.101. CERTIFICATE OF AUTHORITY REQUIRED. (a) Except as provided by Section 887.102, the department shall require an association or person to hold a certificate of authority issued by the department before the association or person may engage in the business of insurance in this state.
(b) If an association or person writes insurance without a certificate of authority issued under Subsection (a), the department shall notify the attorney general. The attorney general shall institute proceedings in the district court of Travis County to restrain the association or person from writing insurance without a certificate of authority. (V.T.I.C. Art. 14.17 (part).)
Sec. 887.102. EXEMPT ASSOCIATION; PERMIT. (a) An association is not required to hold a certificate of authority under Section 887.101 if the association:
(1) limits its membership to:
(A) the employees and the families of employees of a particular designated firm, corporation, or individual; or
(B) borrowers of a federal agency in this state and members of the borrower's immediate family who are living with the borrower and are not engaged in nonfarm work for their chief income;
(2) has been in existence for at least five years;
(3) is not operated for profit; and
(4) does not pay commissions.
(b) An association exempt under this section shall:
(1) make annual reports to the department, on forms provided for that purpose, showing the financial condition of the association, receipts and expenditures of the association, and any other facts required by the department; and
(2) obtain from the department a permit to engage in the business of insurance. (V.T.I.C. Art. 14.17 (part).)
Sec. 887.103. REFUSAL OF CERTIFICATE OF AUTHORITY OR PERMIT. (a) An association may not continue to engage in the business of insurance in this state if the commissioner notifies the association in writing of the commissioner's refusal to issue a certificate of authority or a permit.
(b) Not later than the 60th day after the date notice is received under Subsection (a), an association may file suit to review the commissioner's action in accordance with Subchapter D, Chapter 36. (V.T.I.C. Art. 14.06, Subsec. (a).)
Sec. 887.104. REFUSAL OR REMOVAL FOR UNWORTHINESS OF PUBLIC TRUST. (a) The department may not issue a certificate of authority to an association if the department determines that an officer, employee, or member of the board of directors of the association is unworthy of the trust or confidence of the public.
(b) On issuance of a certificate of authority to an association, the commissioner shall order the removal of an officer, employee, or director of the association if the officer, employee, or director is found unworthy of the trust or confidence of the public.
(c) If the association does not remove an officer, employee, or director as required by an order issued under Subsection (b), the commissioner shall:
(1) revoke the certificate of authority; and
(2) treat the association as insolvent. (V.T.I.C. Art. 14.07.)
[Sections 887.105-887.150 reserved for expansion]
SUBCHAPTER D. MEMBERS
Sec. 887.151. CLASSES OF MEMBERS. (a) An association's constitution and bylaws shall state the number of members to be admitted in a class of the association.
(b) An association shall keep the accounts of the classes' mortuary assessments separate. The association may not use the funds of a class to pay claims for any other class.
(c) Not later than six months after the date a class of members is created, an association must build the class up to the required membership to pay claims in full. Until the required membership level is reached, the insurance certificates for the class may not provide for a benefit greater than $500, unless the association has sufficient funds to lawfully make the full payment of benefits.
(d) Creation of any new class is subject to advance approval of the department. (V.T.I.C. Art. 14.27.)
Sec. 887.152. QUALIFYING MEMBERSHIP IN ASSOCIATION. (a) An individual must qualify under an association's bylaws to become a member of the association.
(b) An association must maintain the qualifying membership at all times. If an association fails to maintain the qualifying membership, the commissioner shall treat the association as insolvent. (V.T.I.C. Art. 14.11.)
Sec. 887.153. VOTING RIGHTS OF MEMBERS. An association shall permit each member of the association to vote at any periodic meeting or special meeting of the members. (V.T.I.C. Art. 14.04 (part).)
Sec. 887.154. MEMBERSHIP RECORDS. An association shall keep:
(1) a complete and correct roster of the association's members, with proper statistical records for determining by age or some other method the proper cost of insurance;
(2) accurate records of classes of memberships; and
(3) records of amounts of assessments paid by each member and by each class that show:
(A) how the funds are distributed between expense and claim funds for each class; and
(B) the amounts paid out of the funds of the whole membership or each class in death claims or other benefits. (V.T.I.C. Art. 14.13 (part).)
Sec. 887.155. TRANSFER OF MEMBERSHIP OR MERGER OF CLASSES. (a) Without advance approval of the department, an association may not:
(1) transfer any part or class of membership or all membership to another association; or
(2) merge classes or transfer a member from one class to another in the association.
(b) The department may grant approval under Subsection (a) only after the department:
(1) completely investigates the facts; and
(2) determines that the proposed merger or transfer is to the advantage of the members or classes affected by the merger or transfer. (V.T.I.C. Art. 14.13 (part).)
[Sections 887.156-887.200 reserved for expansion]
SUBCHAPTER E. POWERS AND DUTIES RELATING TO INSURANCE
AND COVERAGES
Sec. 887.201. LIMIT ON LIFE INSURANCE. An association may not insure an individual life for more than $5,000. (V.T.I.C. Art. 14.18 (part).)
Sec. 887.202. STIPULATED PREMIUM PLAN; DEDUCTION OF UNPAID PREMIUM BALANCE. (a) An association may issue an insurance certificate on a stipulated premium plan that provides for the insured to pay regular premiums weekly, monthly, quarterly, semiannually, or annually, as determined by the insured.
(b) An association may issue an insurance certificate that provides that on the maturity of benefits payable under the certificate any balance of premium for the certificate year remaining unpaid is deducted from the benefits payable. (V.T.I.C. Art. 14.21 (part).)
Sec. 887.203. ISSUANCE OF LIFE INSURANCE POLICY BY CERTAIN ASSOCIATIONS. (a) A local mutual aid association or statewide mutual assessment company that has a claim fund and expense fund with a combined value of at least $100,000 greater than the liabilities of the combined funds may issue a life insurance policy in the same manner as a company organized under Chapter 841.
(b) An insurance policy issued as provided by Subsection (a):
(1) may not insure an individual life for more than $5,000;
(2) must be reserved as required for a company organized under Chapter 841; and
(3) may be issued only on an endowment or limited pay basis. (V.T.I.C. Art. 14.64.)
Sec. 887.204. RENEWAL OR REINSTATEMENT OF INSURANCE CERTIFICATE. (a) If an insurance certificate terminates for any reason and the association's rules provide that a reinstated certificate is regarded as a new certificate, an application for reinstatement must state in at least 10-point type that:
(1) the same rules that apply to the original certificate apply to the reinstated certificate; and
(2) the association may invalidate the certificate within the contestable period for a false statement regarding the applicant's health or physical condition or another matter material to the risk.
(b) On reinstatement of an insurance certificate, an association shall send to the certificate holder by first class mail a copy of the application for reinstatement. The burden of proof is on the association to prove that the association mailed the application.
(c) If a renewal insurance certificate is issued after termination of an insurance certificate, the association shall attach to the renewal insurance certificate a copy of the application for reinstatement. The application is part of the renewal insurance certificate.
(d) If an association renews or reinstates an insurance certificate after termination of the certificate, the association shall divide the reinstated member's payments between the funds in the same percentage as is required of regular payments in the association's bylaws, except that if the period between termination and reinstatement is nine months or longer, the association may:
(1) charge a reinstatement fee not greater than the membership fee; and
(2) place the fee in the expense fund.
(e) A renewal or reinstatement certificate may not be contestable for any cause except nonpayment of assessments for a period longer than six months from the date of renewal or reinstatement, except that if the renewal or reinstatement occurs within the certificate's original two-year contestable period, the contestable period may be extended for six months from the date it would have originally expired. (V.T.I.C. Art. 14.19.)
Sec. 887.205. LIFE INSURANCE CERTIFICATE BENEFICIARIES. (a) An association may pay death benefits only to:
(1) a member's spouse;
(2) a member's relative by blood to the fourth degree or by marriage to the third degree;
(3) a person actually dependent on the member;
(4) a creditor, estate, or other person with an insurable interest; or
(5) a purely charitable or religious institution.
(b) A beneficiary of a life insurance certificate forfeits the beneficiary's interest in the certificate if the beneficiary is the principal or an accomplice in wilfully bringing about the death of the insured. The nearest relative of the insured is entitled to the proceeds of an insurance certificate forfeited under this subsection. (V.T.I.C. Art. 14.28.)
Sec. 887.206. PAYMENT OF CLAIM; PROOF OF CLAIM. (a) An association shall pay each claim under an insurance certificate in full not later than the 60th day after the date of receipt of due proof of claim.
(b) Written notice of a claim given to an association is considered due proof of claim if the association does not provide the claimant with the forms usually provided for filing claims before the 16th day after the date notice is received.
(c) If an association is unable to pay a valid claim in full within the time prescribed by Subsection (a), the commissioner shall treat the association as insolvent. (V.T.I.C. Art. 14.29 (part).)
Sec. 887.207. EXCEPTION TO FULL PAYMENT REQUIREMENT: ASSESSMENT-AS-NEEDED ASSOCIATIONS. (a) Section 887.206 does not apply to a class organized before May 12, 1939, and operating on the postmortem or assessment-as-needed plan on that date.
(b) An association with a postmortem or assessment-as-needed class to which Subsection (a) applies may continue to operate on the plan only if:
(1) the class has a sufficient membership at the assessment rate charged to produce for the claim fund at least 50 percent of the maximum value of the largest certificate in the class; and
(2) the association receives the amount required by Subdivision (1).
(c) If the membership of a class is sufficient in number to pay more than 50 percent but less than 100 percent of the maximum value of the largest certificate in the class, an officer of the association shall print on each assessment notice the percentage of the maximum value of the certificate actually paid on the last claim for death benefits in the class.
(d) If the amount realized on an assessment is not sufficient to pay 50 percent of the maximum amount of promised benefits as shown on the certificate, the commissioner shall treat the association as insolvent.
(e) Any benefits paid by an association operating on a postmortem or assessment-as-needed basis are dependent on the amount realized from assessments on the membership. Each of the association's insurance certificates must state:
(1) that any benefits paid are dependent on the amount realized from assessments on the membership; and
(2) the certificate's maximum payment.
(f) An association or a class in an association organized after May 12, 1939, may not operate on the postmortem or assessment-as-needed plan. (V.T.I.C. Arts. 14.02 (part), 14.31.)
Sec. 887.208. CONTESTED CLAIMS. (a) An association may not contest a claim:
(1) only for delay or for a captious or inconsequential reason; or
(2) to force settlement at less than full payment.
(b) An association shall notify a claimant of the association's intent to deny liability on a claim not later than the 60th day after the date the association receives due proof of claim.
(c) An association that does not notify a claimant as provided by Subsection (b) is presumed as a matter of law to have accepted liability on the claim.
(d) The commissioner shall revoke the certificate of authority of any association the commissioner finds is operating fraudulently or improperly contesting claims.
(e) An association shall report to the department the costs of contests in the annual statement under Section 887.060. The report must be verified by an officer of the association. (V.T.I.C. Art. 14.30 (part).)
Sec. 887.209. VENUE. An action brought against an association that grows out of or is based on any right of claim or loss or proceeds due, arising from or predicated on any claim for benefits under an insurance certificate issued by the association, may be brought in:
(1) the county where the certificate holder or beneficiary instituting the action resides; or
(2) the county of the principal office of the association. (V.T.I.C. Art. 14.35.)
Sec. 887.210. REINSURANCE. (a) An association may enter into a reinsurance agreement with a legal reserve company that:
(1) is authorized to write life, health, and accident insurance in this state; and
(2) has capital or surplus of at least $100,000.
(b) A reinsurance agreement under this section is subject to the commissioner's approval.
(c) An association may not pay more out from its claim fund for reinsurance under this section than is received at the time of reinsurance by the claim fund on the insurance certificates or members reinsured. (V.T.I.C. Art. 14.62 (part).)
[Sections 887.211-887.250 reserved for expansion]
SUBCHAPTER F. CONTENTS OF APPLICATIONS
AND INSURANCE CERTIFICATES
Sec. 887.251. GENERAL REQUIREMENTS FOR INSURANCE CERTIFICATE AND APPLICATION FORMS; INCONTESTABILITY. (a) An insurance certificate issued by an association must include:
(1) any condition of the certificate, including any portion of the bylaws of the association that affects the insurance rights of the parties in any material way; and
(2) a statement that the certificate is issued subject to:
(A) the association's constitution and bylaws; and
(B) any amendments to the constitution and bylaws approved by the commissioner.
(b) An insurance certificate must provide that a certificate in force for two years becomes incontestable, except for nonpayment of dues or assessments, on the second anniversary of the date of issuance, if the insured does not die before that date.
(c) An insurance certificate issued by an association or an application for the certificate may not contain language or be in a form that misleads the certificate holder or applicant about the kind of insurance provided under the certificate. (V.T.I.C. Arts. 14.04 (part), 14.18 (part), 14.22.)
Sec. 887.252. APPLICATION FOR INSURANCE CERTIFICATE. (a) An application for an insurance certificate issued by an association must be signed by the applicant. If the applicant is a minor, the application may be signed by a parent or guardian.
(b) The application for an insurance certificate that provides that a misstatement relating to the applicant's health or physical condition may void the certificate within the contestable period must state that provision in language approved by the commissioner. The statement must be in at least 10-point type.
(c) An association shall attach to an insurance certificate a copy of the application for the certificate. The application is part of the insurance certificate.
(d) In the absence of fraud, each statement in an application for an insurance certificate is regarded as a representation and not a warranty. (V.T.I.C. Art. 14.18 (part).)
Sec. 887.253. LIFE INSURANCE CERTIFICATE FORMS. (a) A life insurance certificate issued by an association must include:
(1) on the front page of the certificate, a definitive statement of the amount of the death benefit to be paid; and
(2) a plain statement of the circumstances or conditions under which the benefit is to be paid.
(b) A life insurance certificate must provide that if the age of the insured is misstated, the amount of insurance is the amount that the premium paid would have purchased if the age had been stated correctly, based on rates in effect when the insured dies. (V.T.I.C. Art. 14.18 (part).)
Sec. 887.254. HEALTH AND ACCIDENT INSURANCE CERTIFICATE FORMS. An insurance certificate issued by an association must include a plain statement of each health, accident, or other benefit under the certificate and the terms under which each benefit is paid. (V.T.I.C. Art. 14.18 (part).)
Sec. 887.255. INSURANCE BENEFIT REDUCTIONS AND EXCLUSIONS. (a) An association may, with the commissioner's approval, issue an insurance certificate that provides for:
(1) reduced benefits if the insured:
(A) dies or is injured while engaged in:
(i) military, naval, or aerial service or aerial flight during peace or war; or
(ii) a hazardous occupation specified in the certificate;
(B) dies by the insured's own hand, regardless of whether the insured was sane or insane; or
(C) dies or is injured by mob violence or legal execution; or
(2) reduced or excluded benefits for sickness from certain causes specified in the certificate.
(b) The front page of an insurance certificate must call attention to any reduction or exclusion of benefits provided by the certificate. The circumstances or conditions under which the reduction or exclusion applies must be stated plainly in the certificate.
(c) If an insurance certificate that provides natural death benefits contains a provision for reducing the greatest death benefit provided by the certificate for a specified insured for a reason other than a reason specified by Subsection (a):
(1) the reduced death benefit for the insured must at all times when the reduction is in effect equal or exceed 120 percent of the total premium paid on that certificate by the insured; and
(2) the reduction must end before the fifth anniversary of the date the certificate is issued.
(d) Subsection (c) does not apply to a life insurance certificate on which the reduction of the death benefit does not apply at the time of the death of the specified insured.
(e) If a life insurance certificate provides for an increase of the initial amount of the death benefit for a specified insured one or more times during the first five years of the certificate, the amount of the death benefit for the insured must at all times during the period of the increasing benefit equal at least 120 percent of the premiums paid on that certificate by the insured during the period of the increase.
(f) Subsection (e) does not apply to a life insurance certificate that has been in force for more than five years from the date the certificate was issued.
(g) Subsections (c)-(f) do not apply to a family group life insurance certificate described by Section 887.402. (V.T.I.C. Art. 14.20 (part).)
Sec. 887.256. FORM APPROVAL. (a) The commissioner shall approve the form and language of an insurance certificate before the certificate is used by an association. The commissioner shall, in cooperation with the several associations, ensure that the certificate forms are as uniform as feasible. Forms for all associations are not required to be uniform.
(b) An insurance certificate form used by an association after May 12, 1939, must comply with this chapter and with any other laws regulating the association. (V.T.I.C. Art. 14.18 (part).)
[Sections 887.257-887.300 reserved for expansion]
SUBCHAPTER G. ASSESSMENTS AND REVENUE
Sec. 887.301. ASSESSMENTS REQUIRED. (a) An association shall levy regular and periodic assessments on its membership in amounts and at intervals necessary to:
(1) meet the reasonable operating expenses of the association; and
(2) allow the association to pay in full any claims arising under its insurance certificates.
(b) An association may also levy an assessment for surplus funds.
(c) An association shall specify the purpose of an assessment.
(d) An assessment on a life insurance certificate issued after May 21, 1965, insuring the life of one or more individuals must be:
(1) in accordance with the reserve standard adopted by the association and approved by the commissioner, except that an association may use the 1956 Chamberlain Reserve Table with interest not to exceed 3-1/2 percent a year; and
(2) in an amount sufficient to deposit in the mortuary or claim fund an amount at least equal to the renewal net premiums computed in accordance with the reserve standard adopted by the association and approved by the commissioner. (V.T.I.C. Art. 14.23, Sec. 1; Art. 14.24 (part).)
Sec. 887.302. AUTHORITY TO INCREASE ASSESSMENT RATES ON CERTAIN INSURANCE CERTIFICATES. (a) An association's board of directors may by resolution increase assessment rates on life insurance certificates in force up to the rate on an attained age basis in accordance with the 1956 Chamberlain Reserve Table, with interest at 3-1/2 percent a year, or any other reasonable, equitable, or necessary increase. The board may also adjust assessment rates on accident and health insurance certificates in force.
(b) An assessment rate increase or adjustment under this section on insurance certificates in force applies to all classes of the same or similar certificates. (V.T.I.C. Art. 14.23, Sec. 4.)
Sec. 887.303. APPROVAL REQUIRED FOR CERTAIN RATE INCREASES. An association may not implement a rate increase on insurance certificates in force before the commissioner approves the rate increase as complying with this chapter. (V.T.I.C. Art. 14.15, Sec. 9; Art. 14.23, Sec. 5.)
Sec. 887.304. LIMIT ON RATE INCREASES. Notwithstanding any other provision of this chapter, on a life insurance certificate issued after May 21, 1965, an association may not during any consecutive five-year period increase the rate to more than double the rate charged the insured at the time of the rate increase. (V.T.I.C. Art. 14.25, Sec. 7.)
Sec. 887.305. EXPENSE LOADING ON CERTAIN INSURANCE CERTIFICATES. If an association increases a life insurance assessment rate at any age other than at age of issue, the expense loading on the new assessments may not, on 50 years of age or greater, exceed 25 percent of the gross assessment charged, unless an additional expense loading is approved by the commissioner as reasonable and necessary. (V.T.I.C. Art. 14.25, Sec. 1 (part).)
Sec. 887.306. ASSESSMENT-AS-NEEDED ASSOCIATIONS: PAYMENTS ON CERTAIN INSURANCE CERTIFICATES. (a) This section applies only to an association operating on an assessment-as-needed basis.
(b) If the members' payments on insurance certificates issued and in force before May 12, 1939, or on the reinsurance or renewals of those certificates, are not sufficient to pay matured death and disability claims in the maximum amount stated in the certificates and to provide for the creation and maintenance of the funds required by the association's bylaws, the association may, with the commissioner's approval and after proper hearing before the commissioner, provide for meeting the deficiency by additional, increased, or extra rates of payment.
(c) The association may give the members the option of agreeing to reduced maximum benefits or making increased payments. (V.T.I.C. Art. 14.32.)
Sec. 887.307. REVENUE OF ASSOCIATION; DEPOSIT. (a) The revenue of an association must be derived from:
(1) membership fees; and
(2) assessments.
(b) Not later than the fifth day after the date an association collects revenue, the association shall deposit the revenue in a state or national bank. (V.T.I.C. Art. 14.24 (part).)
Sec. 887.308. SUSPENSION OF MEMBER FOR NONPAYMENT. Before suspending a member from membership for nonpayment of assessments or membership fees, an association shall send notice to the member by first class mail stating the final date of payment. (V.T.I.C. Art. 14.24 (part).)
Sec. 887.309. FAILURE TO COMPLY WITH CERTAIN COMMISSIONER ORDERS. If an association refuses to comply with an order of the commissioner regarding rates or assessments under this chapter, the commissioner shall treat the association as insolvent. (V.T.I.C. Art. 14.23, Sec. 3.)
[Sections 887.310-887.350 reserved for expansion]
SUBCHAPTER H. CLAIM AND EXPENSE FUNDS
Sec. 887.351. CLAIM AND EXPENSE FUNDS. An association's bylaws must provide for the method and procedure for allocating assessments between the association's claim and expense funds. (V.T.I.C. Art. 14.25, Sec. 3.)
Sec. 887.352. LIMITS ON USE OF FUNDS. An association may spend or invest money from a claim fund or expense fund only as provided for each fund by this subchapter. (V.T.I.C. Art. 14.25, Sec. 5.)
Sec. 887.353. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE CERTIFICATES. (a) This section applies to a life insurance certificate insuring the life of one or more individuals issued:
(1) after December 31, 1965; or
(2) before December 31, 1965, and on which the assessment rate has been increased based on an age other than age on the date the certificate was issued.
(b) To the extent consistent with this subchapter, an association shall divide collected assessments into at least two funds.
(c) An association shall deposit in a claim fund a portion of the association's assessments at least equal to the renewal net premium computed at the age of issue or some other advanced age in accordance with the reserve standard adopted by the association. The association may pay from the claim fund only:
(1) fund claims under insurance certificates;
(2) dividends to certificate holders as provided by Section 887.064; and
(3) any other expenditures permitted by law.
(d) An association shall deposit in an expense fund the remaining portion of the assessments not deposited under Subsection (c). The association may pay expenses from the expense fund.
(e) This section does not apply to an association operating on an assessment-as-needed basis. (V.T.I.C. Art. 14.25, Sec. 1 (part).)
Sec. 887.354. DIVISION OF FUNDS: ACCIDENT AND HEALTH INSURANCE CERTIFICATES AND CERTAIN LIFE INSURANCE CERTIFICATES. (a) This section applies to:
(1) a life insurance certificate in force on December 31, 1965, to which Section 887.353 does not apply; and
(2) an accident or health insurance certificate.
(b) An association shall deposit in a claim fund an amount equal to at least 60 percent of the association's assessments, not including membership fees.
(c) An association shall deposit in an expense fund:
(1) membership fees; and
(2) the remaining portion of the assessments not deposited under Subsection (b).
(d) This section does not apply to an association operating on an assessment-as-needed basis. (V.T.I.C. Art. 14.25, Sec. 1 (part).)
Sec. 887.355. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE CERTIFICATES WITH NO RATE INCREASE. (a) This section applies to a life insurance certificate in force on December 31, 1965, on which the assessment rate has not been increased.
(b) An association may:
(1) deposit in a claim fund at least the net renewal premium, based on the reserve table adopted by the association; and
(2) deposit in an expense fund the remaining portion of the premium.
(c) This section does not apply to an association operating on an assessment-as-needed basis. (V.T.I.C. Art. 14.25, Sec. 1 (part).)
Sec. 887.356. DIVISION OF FUNDS: ASSESSMENT-AS-NEEDED ASSOCIATIONS. (a) An association operating on an assessment-as-needed basis shall divide collected assessments into at least:
(1) a claim fund; and
(2) an expense fund.
(b) An association under this section shall deposit into a claim fund an amount equal to at least 60 percent of the association's assessments, not including membership fees. (V.T.I.C. Art. 14.25, Sec. 2.)
Sec. 887.357. INVESTMENT OF FUNDS. (a) An association may invest money from a claim fund only in securities and investments that are a legal investment for the reserve funds of a domestic life, accident, and health insurance company operating under Chapter 841.
(b) An association may invest money from an expense fund only in securities and investments that are a legal investment for the surplus funds of a domestic life, accident, and health insurance company operating under Chapter 841.
(c) An association may invest surplus funds belonging to the association only in securities that are a legal investment for the surplus funds of a domestic life, accident, and health insurance company operating under Chapter 841. (V.T.I.C. Art. 14.25, Sec. 4; Art. 14.26.)
Sec. 887.358. PAYMENT OF TAXES ON CLAIM FUND INCOME. An association may pay from a claim fund any taxes that are assessed against income on the fund and required to be paid by the association. (V.T.I.C. Art. 14.25, Sec. 1 (part); Art. 14.53.)
Sec. 887.359. PAYMENT OF REINSURANCE PREMIUM. An association may pay from a claim fund the premiums for any reinsurance under Section 887.210. (V.T.I.C. Art. 14.62 (part).)
Sec. 887.360. COST OF DEFENDING CONTESTED CLAIMS. An association authorized to write accident or health insurance may pay the reasonable costs of defending a contested claim on an accident or health insurance certificate from the claim fund of the association if:
(1) the expenditure is approved by the commissioner; and
(2) the association has the reserves required by Subchapter I. (V.T.I.C. Art. 14.25, Sec. 6.)
[Sections 887.361-887.400 reserved for expansion]
SUBCHAPTER I. RESERVES
Sec. 887.401. RESERVES ON INDIVIDUAL LIFE INSURANCE CERTIFICATES. (a) An association shall reserve an individual life insurance certificate insuring one or more persons at individual premiums for each person as provided by this section.
(b) An association shall maintain reserves on each of its individual life insurance certificates in accordance with the reserve standard adopted by the association and approved by the commissioner. The standard must provide reserves that in the aggregate are at least equal to the reserve amounts computed using the 1956 Chamberlain Reserve Table with interest not to exceed 3-1/2 percent a year. An association may use the 1956 Chamberlain Reserve Table with interest not to exceed 3-1/2 percent a year. (V.T.I.C. Art. 14.15, Sec. 2 (part).)
Sec. 887.402. RESERVES ON FAMILY GROUP LIFE INSURANCE CERTIFICATES. (a) An association shall reserve a family group life insurance certificate on which the association charges a group premium that is not reduced on the death of an insured as provided by this section.
(b) An association shall maintain reserves on each of its family group life insurance certificates using one of the following methods:
(1) the reserves must be equal to the reserves that would be required under Section 887.401 on individual life insurance certificates on the lives of the two oldest living members of the family group, with the amount of insurance for those two members determined assuming that the elder of the two will die first;
(2) the reserves must be equal to the reserves required under Section 887.401 on individual life insurance certificates on the lives of the living members of the family group, with the amount of insurance for each member of the family group determined assuming that each member will die first; or
(3) any other table or method of computing reserves approved in advance by the commissioner.
(c) An association may select the method to be used to compute the reserves under Subsection (b). (V.T.I.C. Art. 14.15, Sec. 2 (part).)
Sec. 887.403. ISSUE YEAR AND ISSUE AGE IN CERTAIN INSURANCE CERTIFICATES. (a) In this section, "gross premium" means the renewal net premium plus any expense loading designated by the association or as otherwise regulated by this chapter.
(b) For an individual or family group life insurance certificate in force on December 31, 1965, or an individual or family group life insurance certificate with a rate increase effective after December 31, 1965, the reserves may be computed as if:
(1) the issue year is the last calendar year that the gross premium computed using the reserve table and interest rate adopted by the association at the insured's age in that calendar year is equal to or less than the premium rate charged by the association on the reserved certificate; and
(2) the issue age is the insured's age in the calendar year under Subdivision (1). (V.T.I.C. Art. 14.15, Sec. 2 (part).)
Sec. 887.404. RESERVES ON ACCIDENT AND HEALTH INSURANCE CERTIFICATES. An association shall maintain reserves on each of its accident and health insurance certificates in the manner required of a company authorized to issue that type of coverage under Chapter 841. (V.T.I.C. Art. 14.15, Sec. 2 (part).)
Sec. 887.405. COMPUTATION OF RESERVE LIABILITY. (a) Each year, an association shall compute its reserve liability on all outstanding insurance certificates.
(b) To make the computation, an association:
(1) shall use the net premium basis in accordance with the reserve table and interest rate adopted by the association and approved by the commissioner; and
(2) may use group methods and approximate averages for fractions of a year.
(c) The reserve liability may be computed on not more than a one-year preliminary term.
(d) As soon as practical each year, the commissioner shall compute the reserve liability of each association. To make the computation, the commissioner may use group methods and approximate averages for fractions of a year. (V.T.I.C. Art. 14.15, Secs. 2 (part), 3.)
Sec. 887.406. INCREASE OF RESERVES. (a) If an association does not have in its claim fund the reserves required by this subchapter, the association's board of directors by appropriate action shall increase assessment rates on insurance certificates in force by advancing the age of each insured from the age at the date the certificate is issued or from the age previously advanced or otherwise equitably or reasonably adjust assessment rates to correct the reserve inadequacy. The board shall take that action not later than the 30th day after the date the reserves are computed.
(b) An association may make an assessment rate adjustment under Subsection (a) at any time if it appears that a reserve inadequacy will exist as of December 31 of the year in which the rate adjustment is made.
(c) The commissioner shall order an association to comply with this chapter.
(d) If the board of directors does not comply with Subsection (a), the commissioner shall treat the association as insolvent. (V.T.I.C. Art. 14.15, Sec. 7; Art. 14.23, Sec. 2.)
Sec. 887.407. NONAPPLICABILITY TO ASSESSMENT-AS-NEEDED ASSOCIATIONS. This subchapter does not apply to an association operating on an assessment-as-needed basis. (V.T.I.C. Art. 14.15, Sec. 2 (part).)
[Sections 887.408-887.450 reserved for expansion]
SUBCHAPTER J. CONVERSION TO LEGAL RESERVE INSURANCE COMPANY
Sec. 887.451. AUTHORIZATION TO CONVERT OR REINSURE. Subject to the requirements of this subchapter, an association may convert or reinsure itself to a legal reserve insurance company operating under Chapter 882. (V.T.I.C. Art. 14.61, Sec. 1(a) (part).)
Sec. 887.452. PROPOSAL FOR CONVERSION OR REINSURANCE. An association's board of directors may determine by majority vote to submit a proposed conversion or reinsurance under Section 887.451 to the members of the association. Before the proposed conversion or reinsurance may be submitted to the members, the board must prepare detailed plans for the conversion or reinsurance and submit the plans to the commissioner. (V.T.I.C. Art. 14.61, Sec. 1(a) (part).)
Sec. 887.453. MEMBERS MEETING; NOTICE. (a) On receipt of the commissioner's written approval of proposed plans under Section 887.452 or of the plans as amended to meet the commissioner's requirements in accordance with Chapter 882, an association's board of directors or an officer of the association authorized by its bylaws to call a meeting of its members shall:
(1) call a meeting of the association's members for voting on ratification of the proposed conversion or reinsurance; and
(2) mail to each member of the association:
(A) a copy of the proposed plans; and
(B) a notice of the meeting.
(b) The meeting may not be held before the 16th day after the date the notice is mailed under Subsection (a)(2). (V.T.I.C. Art. 14.61, Secs. 1(a) (part), (b) (part).)
Sec. 887.454. MEMBERS MEETING; PROCEDURES. (a) In a meeting called under Section 887.453, a member may vote in person, by proxy, or by mail.
(b) All votes must be cast by ballot. A majority vote of the members participating in the election is required to ratify the conversion or reinsurance.
(c) The person presiding at the meeting shall supervise and direct the procedure of the meeting and appoint an adequate number of inspectors to conduct the voting.
(d) Under rules adopted by the commissioner, the inspectors may determine all questions concerning the qualifications of the voters and the verification, canvassing, and validity of the ballots. The inspectors shall certify the result of the election to the commissioner and to the association. (V.T.I.C. Art. 14.61, Sec. 1(b) (part).)
Sec. 887.455. COMPLETION AND LEGAL EFFECT OF CONVERSION OR REINSURANCE. (a) An association's conversion or reinsurance is complete when the association has:
(1) complied with any laws regulating the incorporation of a mutual legal reserve insurance company; and
(2) received from the commissioner its charter and certificate of authority to engage in business as a mutual insurance company.
(b) An association that converts or reinsures to a mutual legal reserve insurance company:
(1) is considered by law to have each right, privilege, power, or authority of any other mutual legal reserve company;
(2) is considered by law to be a continuation of the business of the association; and
(3) succeeds to and is invested with:
(A) each right or privilege of the former association that is not inconsistent with Chapter 882;
(B) each franchise or other interest of the former association; and
(C) all property of the former association, including debts due on any account and all choses in action.
(c) On conversion or reinsurance of an association to a mutual legal reserve insurance company, the title to any real estate by deed or otherwise vested in the former association vests in the company, and the title is not in any way impaired because of the conversion or reinsurance. (V.T.I.C. Art. 14.61, Sec. 1(c) (part).)
Sec. 887.456. CONTINUING OBLIGATIONS OF CONVERTED OR REINSURED ASSOCIATION. (a) The standing of each claim against an association that converts or reinsures under this subchapter must be preserved unimpaired under the reorganized company or the company reinsuring the membership of the association.
(b) Each debt, liability, and duty of a converted or reinsured association attaches to the reorganized company or the company reinsuring the membership of the association and may be enforced against it to the same extent as if the debt or liability had been incurred or contracted by the company, except that a reorganized company or reinsuring company may alter a liability created under the terms of an insurance certificate outstanding at the date of conversion or reinsurance in accordance with the plan approved by the commissioner under this subchapter.
(c) Notwithstanding Subsection (b), the company may not alter the renewability or noncancellability of an insurance certificate issued before the date of conversion or reinsurance. (V.T.I.C. Art. 14.61, Sec. 1(c) (part).)
Sec. 887.457. DISBURSEMENT OF CLAIM FUND. (a) The claim fund belonging to an association that converts or reinsures under this subchapter is the property of the reorganized company or the company reinsuring the membership of the former association. Money in the claim fund may be disbursed to:
(1) pay a valid claim outstanding and arising after the date of conversion or reinsurance from an insurance policy issued by the company to the association's members under an approved plan;
(2) establish the legal reserve on new insurance policies issued by the company to the association's members under an approved plan; or
(3) pay the appropriate actuarial portion of the claim fund to a member of the association who refuses to accept a new insurance policy offered by the company.
(b) A member must request payment under Subsection (a)(3) not later than the 60th day after the date of the conversion or reinsurance.
(c) The effective date of a mutual legal reserve company's insurance policy may be the effective date of the reinsurance contract. On conversion, 10 percent of the claim fund credit allocated to each policy may be credited to the contingency reserve fund of the company for the benefit of the policyholders. The balance of the claim fund credit may be applied as:
(1) a reserve credit to permit the company's policy to be backdated to the earliest date the reserve credit allows; or
(2) an annuity to reduce the required premium either for a given term or for the whole of life.
(d) A company may not change the manner in which a claim fund credit is applied under Subsections (c)(1) and (2) without the prior approval of the commissioner. (V.T.I.C. Art. 14.61, Sec. 2.)
[Sections 887.458-887.500 reserved for expansion]
SUBCHAPTER K. CONVERSION TO STOCK LEGAL RESERVE LIFE
INSURANCE COMPANY
Sec. 887.501. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a local mutual aid association or statewide mutual assessment company or association engaging in business in this state on January 1, 1955. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.502. AUTHORIZATION TO CONVERT. An association may convert to a stock legal reserve life insurance company if the association:
(1) has at least $100,000 in the association's mortuary or claim fund at the time of conversion; and
(2) except as provided by Section 887.508, possesses:
(A) capital in an amount equal to at least $700,000 cash; and
(B) surplus in an amount equal to at least $700,000 cash. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.503. APPROVAL BY MEMBERSHIP. An association may convert under this subchapter only if the association's membership votes to approve the conversion at a meeting called for that purpose. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.504. AMENDMENT OF CHARTER OR ARTICLES OF ASSOCIATION REQUIRED. On authorization under Section 887.503, the board of directors and officers of the association shall amend the association's charter or articles of association to comply with Sections 841.051, 841.052, and 841.053. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.505. EXCHANGE OF INSURANCE CERTIFICATES; RESERVES. (a) An association that converts to a stock legal reserve life insurance company shall exchange each insurance certificate in force on the date of the conversion for a legal reserve policy as provided by Section 887.457.
(b) On the exchange of mutual assessment insurance certificates for legal reserve policies as provided by Subsection (a), an association shall establish and maintain the reserves required for a company organized under Chapter 841 for legal reserve policies.
(c) After the reserves are established, the association's capital must remain unimpaired and in an amount equal to at least $700,000. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.506. COMPLETION OF CONVERSION. An association becomes a stock legal reserve life insurance company on:
(1) compliance with this subchapter; and
(2) approval by the commissioner. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.507. LEGAL EFFECT OF CONVERSION. Except as provided by this subchapter, an association that converts to a stock legal reserve life insurance company under this subchapter is subject to Chapter 841. (V.T.I.C. Art. 14.63, Sec. 4.)
Sec. 887.508. EXEMPTION FROM CAPITAL AND SURPLUS REQUIREMENTS. (a) An association is exempt from the capital and surplus requirements of Section 887.502(2) if the association:
(1) possesses capital in an amount equal to at least $100,000 and unencumbered surplus in an amount equal to at least $100,000; and
(2) converted to a stock legal reserve life insurance company before September 1, 1999.
(b) An association that is exempt under Subsection (a) and that converts on or after September 1, 1989, shall immediately increase its capital and surplus to amounts that satisfy Section 887.502(2) on:
(1) a change of control of at least 50 percent of the voting securities of the converted company; or
(2) if the converted company or the holding company that controls the converted company, if any, is not controlled by voting securities, a change of at least 50 percent of the ownership of the converted company or its holding company.
(c) For purposes of Subsection (b), a transfer of ownership because of death, regardless of whether the decedent died testate or intestate, is not considered a change of control of a converted company or its holding company if ownership is transferred only to one or more individuals, each of whom would have been an heir of the decedent had the decedent died intestate. (V.T.I.C. Art. 14.63, Sec. 2.)
Sec. 887.509. LIMITS ON OPERATION OF CONVERTED ASSOCIATION. Unless the association increases the association's capital and surplus to the minimum capital and surplus required for the organization of a stock legal reserve life insurance company under Chapter 841, an association that converts to a stock legal reserve life insurance company under this subchapter may not:
(1) operate in a territory as to which the association was not authorized under the converted association's previous charter or articles of association;
(2) insure a life for more than $5,000 in event of death; or
(3) declare or pay cash dividends. (V.T.I.C. Art. 14.63, Sec. 1 (part).)
Sec. 887.510. INCREASE OF CAPITAL AND SURPLUS REQUIRED. (a) An association that converts to a stock legal reserve life insurance company under this subchapter shall, not later than the 10th anniversary of the date of conversion, increase its capital and surplus to the minimum capital and surplus required for a stock legal reserve life insurance company organized under Chapter 841.
(b) The commissioner shall revoke a converted association's certificate of authority to engage in the business of insurance if the association does not comply with Subsection (a). (V.T.I.C. Art. 14.63, Sec. 3.)
[Sections 887.511-887.550 reserved for expansion]
SUBCHAPTER L. SUPERVISORY INTERVENTION; INSOLVENCY
Sec. 887.551. NOTICE OF INSOLVENCY, HAZARD, NONCOMPLIANCE WITH LAW, OR INSUFFICIENT MEMBERSHIP. The commissioner shall notify an association of the commissioner's determination if, at any time, the commissioner determines that:
(1) the association is insolvent;
(2) the association's condition renders the continuance of its business hazardous to the public or its certificate holders;
(3) the association has exceeded its powers or not complied with the law; or
(4) the association has fewer than 500 members paying assessments. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.552. COMPLIANCE WITH NOTICE REQUIREMENTS. An association shall, under the supervision of the commissioner, comply with the commissioner's requirements not later than the 30th day after the date the association receives notice under Section 887.551. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.553. FAILURE TO COMPLY. (a) If an association does not comply as required by Section 887.552, the commissioner or a conservator appointed by the commissioner shall immediately take charge of the association, including all of the association's property.
(b) The conservator under the direction of the commissioner shall operate the association pending the election of new directors and officers by the association's members if the commissioner is satisfied that the association can best serve its certificate holders and the public through that operation. The commissioner shall determine the manner of election of the new directors and officers.
(c) A conservator may, with the approval of the commissioner, reinsure any part of the association's insurance certificates with a solvent insurance company authorized to engage in the business of insurance in this state. The conservator may transfer to the reinsurer any claim funds or other assets that are required to reinsure those certificates. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.554. COMMISSIONER'S ACTION WHEN ASSOCIATION CANNOT CONTINUE BUSINESS. If the commissioner determines that an association cannot satisfactorily continue business in the interest of its certificate holders under a conservator, the commissioner shall, in the commissioner's discretion:
(1) reinsure the association's insurance certificates with a solvent association authorized to engage in the business of insurance in this state;
(2) direct the conservator to liquidate the association; or
(3) give notice to the attorney general for action under Section 887.555. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.555. ACTION BY ATTORNEY GENERAL. (a) After receiving notice under Section 887.554, the attorney general shall file in Travis County a suit in the nature of quo warranto to forfeit the charter of the association or to require the association to comply with the law or demonstrate its solvency to the commissioner's satisfaction.
(b) The court may:
(1) appoint an agent or receiver to take charge of the association's property and wind up the business of the association under the practice of equity; and
(2) dispose of the business and membership of the association as the court considers proper.
(c) Only the attorney general may file a suit for the appointment of a receiver for an association. A court may not appoint a receiver for an association unless the attorney general has applied for the receiver.
(d) A court may not appoint a receiver for an association before reasonable notice has been given and a hearing held. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.556. REPORT TO ATTORNEY GENERAL. (a) The commissioner shall report to the attorney general:
(1) the completion of the reinsurance or liquidation of all of the insurance certificates of an association; or
(2) the commissioner's approval of the merger, reinsurance, or consolidation of the membership of one association with another.
(b) After receiving a report under this section, the attorney general shall take the action necessary to effect the forfeiture or cancellation of the association's charter. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.557. LIMIT ON MERGER OR TRANSFER OF MEMBERSHIP. The commissioner may not approve the merger or transfer of an association's membership unless the association assuming the merged or transferred members is operating under the commissioner's supervision. (V.T.I.C. Art. 14.33 (part).)
Sec. 887.558. COST OF CONSERVATOR'S SERVICES. The commissioner shall determine the cost incident to a conservator's services under this subchapter. That cost is a charge against the assets of the association to be paid as the commissioner determines. (V.T.I.C. Art. 14.33 (part).)
[Sections 887.559-887.700 reserved for expansion]
SUBCHAPTER O. PENALTIES
Sec. 887.701. UNLAWFUL CONVERSION; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of an association commits an offense if the person:
(1) fraudulently takes, misapplies, or converts to the person's own use any money, property, or other item of value belonging to the association or coming into the person's custody, control, or possession by virtue of the person's office, agency, or employment;
(2) conceals any item described by Subdivision (1) with the intent to take, misapply, or convert the item to the person's own use; or
(3) pays or delivers any item described by Subdivision (1) to any other person, knowing that the other person is not entitled to receive the item.
(b) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than 10 years or less than 2 years. (V.T.I.C. Art. 14.55.)
Sec. 887.702. DIVERSION OF SPECIAL FUNDS; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of an association commits an offense if the person wilfully borrows, withholds, or diverts from its purpose all or part of a special fund that:
(1) belongs to or is under the management and control of an association; and
(2) is designated by law or by rule of the commissioner for a specific use.
(b) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than 10 years or less than 2 years. (V.T.I.C. Art. 14.56.)
Sec. 887.703. APPROPRIATION OF MONEY; CRIMINAL PENALTY. (a) An officer or employee of a mutual accident insurance company commits an offense if the person uses or appropriates, or knowingly permits the use or appropriation by another of, any money belonging to the company in a manner not provided for by the law authorizing the organization of the company.
(b) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than 10 years or less than 2 years. (V.T.I.C. Art. 14.56-1.)
Sec. 887.704. VIOLATION OF COMMISSIONER ORDER; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of an association commits an offense if the person wilfully fails to comply with a lawful order of the commissioner.
(b) An offense under this section is punishable by:
(1) a fine not to exceed $500;
(2) confinement in jail for a term not to exceed six months; or
(3) both the fine and confinement. (V.T.I.C. Art. 14.58.)
Sec. 887.705. OTHER VIOLATIONS; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of an association or other person commits an offense if the person violates a provision of this chapter other than Section 887.701, 887.702, 887.703, or 887.704.
(b) An offense under this section is punishable by:
(1) a fine not to exceed $500;
(2) confinement in jail for a term not to exceed six months; or
(3) both the fine and confinement. (V.T.I.C. Art. 14.59 (part).)
CHAPTER 888. BURIAL ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 888.001. DEFINITIONS
Sec. 888.002. LIBERAL CONSTRUCTION
Sec. 888.003. BYLAWS OF BURIAL ASSOCIATIONS
Sec. 888.004. RULES TO IMPLEMENT PURPOSES OF CHAPTER
Sec. 888.005. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION
ACT
[Sections 888.006-888.050 reserved for expansion]
SUBCHAPTER B. ANNUAL ASSESSMENT
Sec. 888.051. IMPOSITION OF ANNUAL ASSESSMENT; AMOUNT
Sec. 888.052. PAYMENT OF ANNUAL ASSESSMENT
[Sections 888.053-888.100 reserved for expansion]
SUBCHAPTER C. INSURANCE CERTIFICATES; PAYMENT OF BENEFITS
Sec. 888.101. INSURANCE CERTIFICATES ISSUED BY BURIAL
ASSOCIATION
Sec. 888.102. PAYMENT INSTEAD OF MERCHANDISE OR SERVICES
Sec. 888.103. INSURANCE CERTIFICATE FORMS
[Sections 888.104-888.150 reserved for expansion]
SUBCHAPTER D. RATES FOR BURIAL ASSOCIATIONS
Sec. 888.151. STUDIES RELATED TO BURIAL ASSOCIATIONS
AND RATES
Sec. 888.152. ADOPTION OF RATE SCHEDULE BY COMMISSIONER
Sec. 888.153. NEW OR AMENDED RATE SCHEDULES
Sec. 888.154. CONTRACTS WITH EXPERTS AND CONSULTANTS
Sec. 888.155. RETENTION OF BURIAL ASSOCIATION'S INITIAL
RATE SCHEDULE
Sec. 888.156. CHANGE OF RATES BY BURIAL ASSOCIATION
Sec. 888.157. CONTINUATION OF FORMER RATES
Sec. 888.158. FAILURE TO COMPLY WITH COMMISSIONER RATE
ORDERS
[Sections 888.159-888.200 reserved for expansion]
SUBCHAPTER E. PROHIBITIONS
Sec. 888.201. UNAUTHORIZED PROVIDING OF BURIAL OR FUNERAL
BENEFITS
Sec. 888.202. RATE VIOLATIONS
Sec. 888.203. CONNECTION BETWEEN BURIAL ASSOCIATIONS
Sec. 888.204. RULES TO PROHIBIT CERTAIN AFFILIATIONS BETWEEN
BURIAL ASSOCIATIONS AND FUNERAL HOMES
Sec. 888.205. VIOLATION OF CHAPTER; CRIMINAL PENALTY
CHAPTER 888. BURIAL ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 888.001. DEFINITIONS. In this chapter:
(1) "Burial association" means an individual, firm, partnership, association, or corporation engaged in the business of providing burial or funeral benefits payable partly or wholly in merchandise or services, not to exceed $150 or the value thereof. The term includes a burial company and a burial society.
(2) "Insurance certificate" and "member" have the meanings assigned by Section 887.001. (V.T.I.C. Art. 14.37 (part); New.)
Sec. 888.002. LIBERAL CONSTRUCTION. Sections 888.051, 888.052, 888.102(b), 888.151, 888.152, 888.153, 888.154, 888.155, 888.156, 888.157, 888.202, 888.203, and 888.204 shall be liberally construed. (V.T.I.C. Art. 14.51 (part).)
Sec. 888.003. BYLAWS OF BURIAL ASSOCIATIONS. The bylaws of a burial association may not contain any provision in conflict with this chapter. (V.T.I.C. Art. 14.04 (part).)
Sec. 888.004. RULES TO IMPLEMENT PURPOSES OF CHAPTER. The commissioner may adopt reasonable rules to implement the purposes of this chapter. (V.T.I.C. Art. 14.39.)
Sec. 888.005. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (a) Except to the extent of any conflict with this code, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a burial association. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to burial associations.
(b) On advance approval of the commissioner, a burial association may pay dividends to its members. (V.A.C.S. Art. 1396-10.04, Sec. B (part).)
[Sections 888.006-888.050 reserved for expansion]
SUBCHAPTER B. ANNUAL ASSESSMENT
Sec. 888.051. IMPOSITION OF ANNUAL ASSESSMENT; AMOUNT. (a) An annual assessment is imposed on each burial association that holds a certificate of authority to engage in the business of insurance in this state. The assessment is in addition to any other fee that the association is required to pay.
(b) The amount of the assessment is equal to the greater of:
(1) the amount computed by multiplying one-half cent by the number of members in the burial association on December 31 of the applicable year; or
(2) $5. (V.T.I.C. Art. 14.42 (part).)
Sec. 888.052. PAYMENT OF ANNUAL ASSESSMENT. (a) Each burial association shall pay the annual assessment imposed by Section 888.051 to the department between January 1 and March 1 at the same time the association files its annual statement with the department.
(b) Annual assessments collected under this section shall be deposited to the credit of the Texas Department of Insurance operating account. Article 1.31A applies to the assessments.
(c) All assessments paid to the department under this section are for the use and benefit of the department to:
(1) obtain advice, information, and knowledge relating to adequate and reasonable rates for burial associations in this state;
(2) compile records for purposes of Subdivision (1); and
(3) implement Sections 888.051, 888.052, 888.102(b), 888.151, 888.152, 888.153, 888.154, 888.155, 888.156, 888.157, 888.202, 888.203, and 888.204. (V.T.I.C. Art. 14.42 (part).)
[Sections 888.053-888.100 reserved for expansion]
SUBCHAPTER C. INSURANCE CERTIFICATES; PAYMENT OF BENEFITS
Sec. 888.101. INSURANCE CERTIFICATES ISSUED BY BURIAL ASSOCIATION. (a) Except as provided by Subsection (c), an insurance certificate issued by a burial association must provide for the payment of the benefit in specified merchandise or burial services.
(b) The merchandise or services to be provided must be:
(1) stated in the insurance certificate; and
(2) approved by the department as being of the reasonable value stated on the face of the certificate.
(c) Subsections (a) and (b) do not apply if, at the time the insurance certificate is issued, the insured elects to have the benefit paid in cash.
(d) An election under this section must be stated in the insurance certificate. (V.T.I.C. Art. 14.38 (part).)
Sec. 888.102. PAYMENT INSTEAD OF MERCHANDISE OR SERVICES. (a) If a burial association that issues an insurance certificate fails or refuses to provide the merchandise or services specified by the certificate, the association shall pay the benefit in cash.
(b) If a burial association that issues an insurance certificate is not given the opportunity to provide the merchandise or services specified by the certificate, instead of the specified merchandise or services, the association shall pay the greater of:
(1) the total amount paid into its mortuary fund to the credit of that certificate's account; or
(2) the percentage of the certificate's face value specified by the certificate. (V.T.I.C. Arts. 14.38 (part), 14.52.)
Sec. 888.103. INSURANCE CERTIFICATE FORMS. An insurance certificate form used by a burial association on or after May 12, 1939, must comply with this chapter. (V.T.I.C. Art. 14.18 (part).)
[Sections 888.104-888.150 reserved for expansion]
SUBCHAPTER D. RATES FOR BURIAL ASSOCIATIONS
Sec. 888.151. STUDIES RELATED TO BURIAL ASSOCIATIONS AND RATES. (a) The commissioner shall:
(1) study the statistics, rates, and experiences of burial associations; and
(2) collect data, statistics, and information on the death rates, lapses, experiences, and other information relating to burial association rates in and outside of this state that the commissioner considers useful in determining reasonable and adequate rates for burial associations.
(b) The commissioner may distribute information collected under Subsection (a)(2) to burial associations in this state. (V.T.I.C. Arts. 14.47, 14.48 (part).)
Sec. 888.152. ADOPTION OF RATE SCHEDULE BY COMMISSIONER. (a) The commissioner shall adopt a schedule of reasonable and adequate rates that a burial association may charge its members. The schedule of rates must be adopted in compliance with Chapter 2001, Government Code.
(b) The schedule must show the maximum and minimum rates that a burial association may charge per week, per month, per quarter, per six months, and per year, for the definite benefits at the definite ages. The commissioner must designate the ages in convenient groups.
(c) To ensure the adequacy and reasonableness of the rates, the commissioner may consider information gathered from an area of this state that is sufficiently large to include the varying conditions of the risks involved and during a period sufficiently long to ensure that the minimum and maximum rates authorized are:
(1) just and reasonable as they apply to members of the public who become insured under this chapter; and
(2) adequate and non-confiscatory as they apply to the burial associations.
(d) The commissioner may require:
(1) sworn statements from any burial association in this state showing its experience in rates collected and claims paid over a reasonable period; and
(2) any other information the commissioner considers necessary or useful in adopting the rate schedule.
(e) The commissioner shall mail a copy of the adopted rate schedule to each burial association that holds a certificate of authority to engage in the business of insurance in this state. (V.T.I.C. Art. 14.44.)
Sec. 888.153. NEW OR AMENDED RATE SCHEDULES. (a) At any time the commissioner considers appropriate, the commissioner may adopt:
(1) a new rate schedule for burial associations; or
(2) an amendment to an existing rate schedule.
(b) After the commissioner adopts a new rate schedule or an amendment to an existing rate schedule and sends a copy to the burial associations, each burial association shall use the new or amended rate schedule for individuals who the association subsequently accepts as members. (V.T.I.C. Art. 14.48 (part).)
Sec. 888.154. CONTRACTS WITH EXPERTS AND CONSULTANTS. The commissioner may contract with experts and consultants to assist the commissioner in exercising the commissioner's powers and performing the commissioner's duties under this subchapter. (V.T.I.C. Art. 14.43, Sec. (b) (part).)
Sec. 888.155. RETENTION OF BURIAL ASSOCIATION'S INITIAL RATE SCHEDULE. Each burial association shall retain, as part of its permanent records, the initial rate schedule adopted by the association under former Article 14.45, Insurance Code, following the amendment of that article by Chapter 593, Acts of the 66th Legislature, Regular Session, 1979. (V.T.I.C. Art. 14.45 (part).)
Sec. 888.156. CHANGE OF RATES BY BURIAL ASSOCIATION. (a) With the commissioner's consent, a burial association may change its rates by adopting a new rate schedule and filing that schedule with the commissioner.
(b) The new rate schedule must be similar in all respects to the initial schedule adopted by the burial association and each new rate must be not less than the minimum or more than the maximum rate adopted by the commissioner. (V.T.I.C. Art. 14.45 (part).)
Sec. 888.157. CONTINUATION OF FORMER RATES. (a) A burial association that had rates adopted and in use before June 12, 1947, may continue to apply those rates to individuals who were members of the burial association on that date.
(b) With the commissioner's approval, the burial association may:
(1) change the rates described by Subsection (a); and
(2) make the new rates correspond to the rate schedule most recently filed by the burial association with the department. (V.T.I.C. Art. 14.49.)
Sec. 888.158. FAILURE TO COMPLY WITH COMMISSIONER RATE ORDERS. If a burial association refuses to comply with an order of the commissioner regarding rates under this subchapter, the commissioner shall consider the association insolvent. (V.T.I.C. Art. 14.23, Sec. 3.)
[Sections 888.159-888.200 reserved for expansion]
SUBCHAPTER E. PROHIBITIONS
Sec. 888.201. UNAUTHORIZED PROVIDING OF BURIAL OR FUNERAL BENEFITS. An individual, firm, partnership, corporation, or association may not engage in the business of providing burial or funeral benefits payable partly or wholly in merchandise or services unless the individual, firm, partnership, corporation, or association is authorized to engage in that business by this chapter, Chapter 886, Chapter 887, or another law. (V.T.I.C. Art. 14.37 (part).)
Sec. 888.202. RATE VIOLATIONS. (a) A burial association or an officer, agent, or employee of a burial association may not charge or collect any rate from a member of the association other than the rate applicable for the age and benefit stated in the association's rate schedule on file with the commissioner and in force at that time.
(b) An officer, agent, or employee of a burial association commits an offense if the officer, agent, or employee violates Subsection (a).
(c) An officer of a burial association commits an offense if the officer knowingly permits a violation of Subsection (a).
(d) An offense under this section is a misdemeanor punishable by a fine of not less than $50 or more than $200.
(e) The department may revoke the certificate of authority of a burial association that violates this section. (V.T.I.C. Art. 14.46.)
Sec. 888.203. CONNECTION BETWEEN BURIAL ASSOCIATIONS. (a) A burial association may not be directly or indirectly connected with another burial association.
(b) A member, director, or officer of a burial association may not be a member, director, or officer of another burial association.
(c) A person whose spouse or employee is an officer or director of a burial association may not be an officer or director of another burial association.
(d) A funeral director or funeral home directly or indirectly connected with a burial association or designated by a burial association as its funeral director or funeral home may not be:
(1) connected in any manner with another burial association; or
(2) designated by another burial association as its funeral director or funeral home to:
(A) provide its members with services or merchandise; or
(B) service its policies. (V.T.I.C. Art. 14.50.)
Sec. 888.204. RULES TO PROHIBIT CERTAIN AFFILIATIONS BETWEEN BURIAL ASSOCIATIONS AND FUNERAL HOMES. The commissioner shall adopt rules necessary to prohibit a funeral home or an owner of an interest in a funeral home from being directly or indirectly connected or affiliated with more than one burial association. (V.T.I.C. Art. 14.51 (part).)
Sec. 888.205. VIOLATION OF CHAPTER; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of a burial association, or other person commits an offense if the person violates a provision of this chapter other than Section 888.202.
(b) An offense under this section is a misdemeanor punishable by:
(1) a fine not to exceed $500;
(2) confinement in jail for a term not to exceed six months; or
(3) both the fine and confinement. (V.T.I.C. Art. 14.59 (part).)
[Chapters 889-910 reserved for expansion]
SUBTITLE F. FARM AND COUNTY MUTUAL
INSURANCE COMPANIES
CHAPTER 911. FARM MUTUAL INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 911.001. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS
Sec. 911.002. GENERAL RULEMAKING AUTHORITY; ENFORCEMENT
Sec. 911.003. FEES
[Sections 911.004-911.050 reserved for expansion]
SUBCHAPTER B. ORGANIZATION OF FARM MUTUAL
INSURANCE COMPANY; DIRECTORS
Sec. 911.051. APPLICABILITY OF TEXAS NON-PROFIT
CORPORATION ACT
Sec. 911.052. FORMATION OF COMPANY: INCORPORATION
REQUIRED
Sec. 911.053. INCORPORATION REQUIREMENTS
Sec. 911.054. CHARTER AND ARTICLES OF INCORPORATION
Sec. 911.055. APPLICATION FOR PERMIT TO SOLICIT
INSURANCE
Sec. 911.056. ISSUANCE OF PERMIT TO SOLICIT INSURANCE;
TERM
Sec. 911.057. COLLECTION AND REFUND OF MONEY FROM
CERTAIN INDIVIDUALS APPLYING FOR INSURANCE
Sec. 911.058. MEMBERSHIP CONTROL OF COMPANY
Sec. 911.059. ELIGIBILITY OF BOARD OF DIRECTORS;
TERM
Sec. 911.060. GENERAL POWERS OF BOARD OF DIRECTORS
Sec. 911.061. AUTHORITY TO BORROW MONEY
Sec. 911.062. REMOVAL OF OFFICER OR DIRECTOR
Sec. 911.063. CREATION OF LOCAL CHAPTERS AND
DISTRICTS
Sec. 911.064. POLICYHOLDER MEETINGS
Sec. 911.065. VOTING BY POLICYHOLDER
Sec. 911.066. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS
Sec. 911.067. APPLICATION FOR EXTENSION OF CHARTER FOR
CERTAIN COMPANIES; TERM
[Sections 911.068-911.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 911.101. AUTHORITY TO ENGAGE IN BUSINESS
[Sections 911.102-911.150 reserved for expansion]
SUBCHAPTER D. POLICIES AND COVERAGE
Sec. 911.151. KINDS OF INSURANCE AUTHORIZED
Sec. 911.152. PROPERTY AND HAZARDS AGAINST WHICH
COMPANY MAY NOT INSURE
Sec. 911.153. CONTRACT TERMS: INCORPORATION OF BYLAWS
Sec. 911.154. CONTRACT TERMS: ADOPTION OF ADDITIONAL
PROVISIONS
Sec. 911.155. REPAIR OR REPLACEMENT OF INSURED
PROPERTY
[Sections 911.156-911.200 reserved for expansion]
SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS
Sec. 911.201. PAYMENT OF PREMIUM OR ASSESSMENT
Sec. 911.202. NONPAYMENT OF PREMIUMS OR ASSESSMENTS:
FILING OF ACTION
Sec. 911.203. POLICYHOLDER LIABILITY
[Sections 911.204-911.250 reserved for expansion]
SUBCHAPTER F. AGENTS
Sec. 911.251. LICENSING AND APPOINTMENT OF CERTAIN AGENTS
[Sections 911.252-911.300 reserved for expansion]
SUBCHAPTER G. REGULATION OF FARM MUTUAL INSURANCE COMPANY;
FINANCIAL REQUIREMENTS
Sec. 911.301. GENERAL OPERATING REQUIREMENTS
Sec. 911.302. LOCATION OF BUSINESS
Sec. 911.303. REINSURANCE
Sec. 911.304. ANNUAL REPORTS REQUIRED
Sec. 911.305. EXAMINATION OF COMPANY
Sec. 911.306. SOLVENCY REQUIREMENTS
Sec. 911.307. RESERVE REQUIREMENTS
Sec. 911.308. SURPLUS REQUIREMENTS
CHAPTER 911. FARM MUTUAL INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 911.001. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (a) A provision of this code, other than this chapter, does not apply to a farm mutual insurance company holding a certificate of authority under this chapter unless farm mutual insurance companies are expressly mentioned in the other law.
(b) A law enacted after May 20, 1973, does not apply to a farm mutual insurance company unless the law states that it applies to a farm mutual insurance company.
(c) Except to the extent of any conflict with this chapter, the following provisions apply to a farm mutual insurance company:
(1) Subchapter A, Chapter 32;
(2) Subchapter D, Chapter 36;
(3) Sections 31.002(2), 32.021(c), 32.023, 32.041, 33.002, 38.001, 81.001-81.004, 801.051-801.055, 801.057, 801.101, 801.102, 822.204, 841.004, 841.251, 841.252, and 862.101;
(4) Chapter 802;
(5) Subchapter A, Chapter 805;
(6) Chapter 824; and
(7) Sections 2, 5, 6, and 17, Article 1.10, and Articles 1.09-1, 1.11, 1.12, 1.13, 1.15, 1.15A, 1.16, 1.17, 1.18, 1.19, 1.20, 1.21, 1.22, 2.10, 21.21, 21.28, 21.28-A, 21.28-C, 21.39, and 21.39-A.
(d) After hearing, the commissioner may adopt rules regarding the application of a law referred to in Subsection (c) to farm mutual insurance companies. The department may enforce rules adopted under this subsection. (V.T.I.C. Arts. 16.24, 16.27 (part).)
Sec. 911.002. GENERAL RULEMAKING AUTHORITY; ENFORCEMENT. After hearing, the commissioner may adopt rules to clarify and augment this chapter as determined by the commissioner to be necessary to accomplish the purposes of this chapter. The department may enforce rules adopted under this section. (V.T.I.C. Art. 16.27 (part).)
Sec. 911.003. FEES. (a) The department shall charge and collect the following fees:
(1) $10 for an amendment to a farm mutual insurance company's charter; and
(2) $1 for the issuance of a company's certificate of authority.
(b) The department shall charge and the comptroller shall collect a fee of $20 for the filing of an annual statement required by the department. (V.T.I.C. Art. 16.22, Subsecs. (a) (part), (b).)
[Sections 911.004-911.050 reserved for expansion]
SUBCHAPTER B. ORGANIZATION OF FARM MUTUAL
INSURANCE COMPANY; DIRECTORS
Sec. 911.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. Except to the extent of any conflict with this chapter, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a farm mutual insurance company. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to farm mutual insurance companies. (V.T.I.C. Art. 16.23.)
Sec. 911.052. FORMATION OF COMPANY: INCORPORATION REQUIRED. To form a farm mutual insurance company, an association of individuals that does not hold a certificate of authority issued by the department must obtain a charter as required by this subchapter. (V.T.I.C. Art. 16.03, Subsec. (b) (part); Art. 16.06 (part).)
Sec. 911.053. INCORPORATION REQUIREMENTS. (a) In this section, "separate risk" means one or more items of real property and the property's contents, if any, that is not exposed to any other property on which insurance is applied for in the association seeking the charter.
(b) To be granted a charter as a farm mutual insurance company, an association must:
(1) demonstrate that the association:
(A) has existed as an association of individuals for at least three years;
(B) has at least 100 individual members;
(C) operates for the purpose of membership recreation or welfare under a system of subordinate lodges, locals, or districts;
(D) does not have capital stock;
(E) is organized and operates solely for the mutual benefit of its members and not for profit;
(F) has a representative form of government; and
(G) has decided by a majority vote of the association's members to apply for a charter as a farm mutual insurance company under this chapter; and
(2) have:
(A) at least 100 written applications for insurance on at least 400 separate risks; and
(B) an unencumbered surplus as required by Section 911.308(b).
(c) Coverage for a risk described by Subsection (b)(2)(A) may not be in an amount that exceeds one percent of the total amount of insurance coverage to be issued by the association as stated in its application for a charter. (V.T.I.C. Art. 16.03, Subsec. (b) (part); Art. 16.06 (part).)
Sec. 911.054. CHARTER AND ARTICLES OF INCORPORATION. (a) The charter and articles of incorporation of an association that wants to form a farm mutual insurance company must state the names and post office addresses of at least 25 charter members of the company, all of whom are residents of one or more adjoining counties in this state and each of whom must:
(1) be a member of the association;
(2) own at least $5,000 of insurable property for which the member has applied in writing for insurance coverage from the company to be formed; and
(3) sign the charter and articles of incorporation.
(b) In addition to the requirements of Subsection (a), the charter must:
(1) be acknowledged before a notary public by at least five of the charter members described by Subsection (a);
(2) state:
(A) the name of the company, which must include the words "Farm Mutual" or "Farmers Mutual";
(B) the location of the company's principal office;
(C) the number, names, and post office addresses of each of the company's first directors, of which there must be at least five; and
(D) the type of property the company will insure and the risk to be insured against; and
(3) include any other provision the incorporators want consistent with this chapter. (V.T.I.C. Art. 16.01, Subsec. (c) (part); Art. 16.04.)
Sec. 911.055. APPLICATION FOR PERMIT TO SOLICIT INSURANCE. (a) At least 10 residents described by Section 911.054(a) that want to form a farm mutual insurance company may apply to the department for a permit to solicit insurance on the mutual or cooperative plan.
(b) The application for a permit to solicit insurance must:
(1) state:
(A) that at least 100 individuals are members of an association described by Section 911.053(b)(1);
(B) that the association has indicated, by majority vote, that the association wants to:
(i) insure property of the association's members under this chapter; and
(ii) be chartered as a farm mutual insurance company;
(C) the name of the company, which must include the words "Farm Mutual" or "Farmers Mutual";
(D) the location of the company's principal office;
(E) the risks the company proposes to insure; and
(F) the names and places of residence of at least 10 of the applicants; and
(2) be accompanied by:
(A) affidavits of at least two of the applicants, each of whom must:
(i) state the applicant's name and residence; and
(ii) verify the facts stated in the application; and
(B) a filing fee in the amount of $25. (V.T.I.C. Art. 16.05 (part).)
Sec. 911.056. ISSUANCE OF PERMIT TO SOLICIT INSURANCE; TERM. (a) On receipt of an application for a permit to solicit insurance under Section 911.055, the department shall examine the application. If the department finds that the application complies with this chapter, the department shall issue to the applicants a permit to solicit insurance.
(b) A permit issued under this section authorizes the permit holders to solicit insurance on the mutual or cooperative plan in accordance with the terms of the application. The permit does not authorize the permit holders to:
(1) issue insurance policies; or
(2) pay losses.
(c) A permit issued under this section is valid for six months. On receipt of an application for renewal and a fee in the amount of $10, the department may renew a permit issued under Section 911.055 as frequently and for the period as the department determines necessary. (V.T.I.C. Art. 16.05 (part).)
Sec. 911.057. COLLECTION AND REFUND OF MONEY FROM CERTAIN INDIVIDUALS APPLYING FOR INSURANCE. An association described by Section 911.053(b)(1) of which the applicants for a permit to solicit insurance are members shall hold in trust money collected from an individual applying for insurance in the association until the association is incorporated. If the association's incorporation is not perfected, the association shall refund the money to the individual applying for the insurance. (V.T.I.C. Art. 16.05 (part).)
Sec. 911.058. MEMBERSHIP CONTROL OF COMPANY. (a) The control of a farm mutual insurance company must be ultimately vested as provided by this chapter in the company's members through a supreme legislative or governing body, the members of which must be elected directly by the company's members or by delegates elected by the company's members.
(b) Through the company's governing body, the company's members may establish local chapters, branches, lodges, or similar organizations.
(c) The methods provided by this section for the control of a farm mutual insurance company are exclusive. (V.T.I.C. Art. 16.01, Subsec. (d).)
Sec. 911.059. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (a) An individual is eligible to serve as a director of a farm mutual insurance company if the individual is a policyholder who maintains insurance coverage in the amount of at least $3,000 written by the company on the individual's property.
(b) Except as otherwise provided by the company's bylaws or constitution, a director serves for a term of one year or until the director's successor qualifies for office. (V.T.I.C. Art. 16.12.)
Sec. 911.060. GENERAL POWERS OF BOARD OF DIRECTORS. The board of directors of a farm mutual insurance company has the powers provided by:
(1) this chapter; and
(2) the company's charter, constitution, and bylaws to the extent those powers do not conflict with this chapter. (V.T.I.C. Art. 16.14.)
Sec. 911.061. AUTHORITY TO BORROW MONEY. (a) The board of directors of a farm mutual insurance company, acting through its authorized officers, may borrow money in an amount determined to be necessary to pay the company's accrued or unaccrued losses.
(b) The board may pledge as security for a loan the assets of the company, including the contingent liability of its policyholders. (V.T.I.C. Art. 16.13.)
Sec. 911.062. REMOVAL OF OFFICER OR DIRECTOR. (a) The board of directors of a farm mutual insurance company, at a meeting, may remove an officer or director of the company if, by a two-thirds majority vote of all the company's directors, the board determines that the removal of the individual is in the best interest of the company. The board may remove an officer or director under this subsection without stating a reason for the removal.
(b) The board may appoint one or more individuals to assume the duties and serve the unexpired term of an officer or director removed under this section. (V.T.I.C. Art. 16.16.)
Sec. 911.063. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (a) A farm mutual insurance company's bylaws may provide for:
(1) the organization of local chapters to transact the company's business; and
(2) the creation of districts in and for which directors may be elected.
(b) The bylaws may also provide that delegates from the company's local chapters are the company's supreme governing body.
(c) The company may consider the hazards against which the company insures and the company's classes of risks and territory of operation in organizing the local chapters and creating the districts. (V.T.I.C. Art. 16.08, Subsec. (f).)
Sec. 911.064. POLICYHOLDER MEETINGS. (a) A farm mutual insurance company shall hold a policyholder meeting to elect directors and transact business at the time and place and in the manner prescribed by the company's bylaws.
(b) A special meeting of a company's policyholders may be called by:
(1) the president, the general manager, or one-third of the company's directors; or
(2) the commissioner. (V.T.I.C. Art. 16.08, Subsec. (g) (part).)
Sec. 911.065. VOTING BY POLICYHOLDER. (a) Each policyholder of a farm mutual insurance company is entitled to only one vote at a policyholders' meeting.
(b) A policyholder may not vote by proxy. (V.T.I.C. Art. 16.08, Subsec. (g) (part).)
Sec. 911.066. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. A farm mutual insurance company may provide in its bylaws that a company adjuster, representative appointed by the company, or local chapter or officer or agent elected by the local chapter may not waive a provision in the company's constitution or bylaws or in a policy issued by the company. (V.T.I.C. Art. 16.09.)
Sec. 911.067. APPLICATION FOR EXTENSION OF CHARTER FOR CERTAIN COMPANIES; TERM. (a) Before a farm mutual insurance company's charter expires, the company may apply to the department for an extension of the company's charter if:
(1) the company was chartered, holding a certificate of authority, and operating before May 21, 1973, under Chapter 16, Insurance Code, as it existed on that date; or
(2) the company was organized and engaging in business before April 6, 1937, and the company continues to engage in business.
(b) A farm mutual insurance company described by Subsection (a) and whose charter has expired may apply to the department to have the charter extended perpetually if the company is engaged in business in this state.
(c) The term of the charter begins on the date that the charter is extended or, if the original charter expired before the charter is extended, the date the original charter expired.
(d) An application for an extension must be authorized by either a two-thirds majority vote of the company's directors or by a simple majority vote of those voting at a policyholders' meeting and must:
(1) state in full the charter to be extended;
(2) state the period for which the charter is to be extended; and
(3) be signed and acknowledged by the president and secretary of the company.
(e) A company whose charter is extended retains the rights, privileges, and immunities granted the company under the company's original charter.
(f) The department shall charge and collect a fee of $10 for the extension of a farm mutual insurance company's charter. (V.T.I.C. Art. 16.03, Subsec. (a) (part); Art. 16.21 (part); Art. 16.22, Subsec. (a) (part).)
[Sections 911.068-911.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 911.101. AUTHORITY TO ENGAGE IN BUSINESS. Except to the extent of any conflict with this chapter, a farm mutual insurance company must hold a certificate of authority under Section 801.051 to engage in the business of insurance in this state under this chapter. (V.T.I.C. Art. 16.24, Subsec. (b) (part).)
[Sections 911.102-911.150 reserved for expansion]
SUBCHAPTER D. POLICIES AND COVERAGE
Sec. 911.151. KINDS OF INSURANCE AUTHORIZED. (a) A farm mutual insurance company may insure property against loss or damage by:
(1) fire, lightning, explosion, theft, windstorm, hurricane, hail, riot, civil commotion, smoke, aircraft, or land vehicles; or
(2) any other hazard against which any other fire or windstorm insurance company operating in this state under Chapter 862 may write insurance on property described by Subsection (b).
(b) The company may write insurance against the hazards described by Subsection (a) on:
(1) a rural or urban dwelling and attendant outhouses and yard buildings and all their contents for home and personal use, musical instruments and libraries, barns and ranch buildings of any description and vehicles and implements used on or about barns or ranch buildings;
(2) agricultural products that are produced or kept on farms or ranches;
(3) a church building, fraternal lodge hall, private or church school, or nonindustrial use building owned by a nonprofit organization, regardless of the location;
(4) a trailer or mobile home; and
(5) growing crops if the insurance is reinsured by:
(A) the Federal Crop Insurance Corporation under Section 508, Federal Crop Insurance Act (7 U.S.C. Section 1508); or
(B) a property and casualty insurance company that:
(i) is authorized to write insurance in this state; and
(ii) has a rating by the A.M. Best Company of A- or better. (V.T.I.C. Art. 16.01, Subsecs. (a) (part), (b) (part).)
Sec. 911.152. PROPERTY AND HAZARDS AGAINST WHICH COMPANY MAY NOT INSURE. (a) A farm mutual insurance company may not insure:
(1) a building, or the building's contents, with more than 40 percent of the building's floor space or more than 500 square feet of floor space, whichever is less, used for business purposes, except as provided by Section 911.151(b)(3); or
(2) any type of commercial or private passenger motor vehicle, except as provided by Section 911.151(b)(4).
(b) A farm mutual insurance company may not assume or issue an insurance policy that:
(1) indemnifies an insured for liability to a third party the insured incurs in committing a tortious act; or
(2) covers an insured for liability the insured incurs under a contract to maintain, hold, or store property belonging to another. (V.T.I.C. Art. 16.01, Subsec. (b) (part); Art. 16.02.)
Sec. 911.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (a) A farm mutual insurance company's bylaws are part of each contract between the company and an insured.
(b) Each policy issued by the company must state that the company's bylaws are part of the contract. (V.T.I.C. Art. 16.08, Subsec. (e).)
Sec. 911.154. CONTRACT TERMS: ADOPTION OF ADDITIONAL PROVISIONS. (a) A farm mutual insurance company may adopt as part of the company's bylaws and insurance policies any provision contained in the standard policies of companies writing fire or windstorm insurance as adopted by the commissioner to the extent the provision applies to a farm mutual insurance company.
(b) A company that adopts a provision as provided by Subsection (a) shall state in the company's bylaws or in each policy issued by the company that the provision has been adopted as provided by Subsection (a). (V.T.I.C. Art. 16.08, Subsec. (c).)
Sec. 911.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. The company's bylaws may authorize the company to require, at its option, that all or a percentage of the money paid for a loss be used to replace or repair the damaged or destroyed property. The requirement may apply equally to personal and real property, including personal and real property exempt from execution, such as a homestead or a building on the homestead. The company may provide in its bylaws that the requirements of Section 862.053 do not apply to its insurance policies. (V.T.I.C. Art. 16.08, Subsec. (d).)
[Sections 911.156-911.200 reserved for expansion]
SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS
Sec. 911.201. PAYMENT OF PREMIUM OR ASSESSMENT. (a) A farm mutual insurance company's bylaws must:
(1) state the time and manner of the levy and payment of a premium or assessment for policies written by the company;
(2) in addition to the regular premium or assessment under Subdivision (1), establish the contingent liability of a policyholder for all losses accrued while a policy is in force in the amount of at least $1 for each $100 of insurance coverage, except as provided by Subsection (b); and
(3) state the time and manner of payment of a policyholder's contingent liability established under Subdivision (2).
(b) A company's bylaws may provide for the issuance of policies without contingent liability as required by Subsection (a)(2) if the company has policyholder surplus in the amount of at least $1,000,000.
(c) As required by its bylaws, a farm mutual insurance company shall establish and levy premiums and assessments, including the contingent liability of a policyholder, for all insurance written by the company.
(d) A policyholder shall pay premiums and assessments as required by the company's bylaws.
(e) The premium or assessment for a policy shall be secured by a lien on each item of real or personal property, other than a homestead, covered by the policy, including the land on which an insured building is located. The lien remains on the property while the insured owns the property.
(f) A conservator, receiver, or liquidator of a farm mutual insurance company may not make an assessment against a policyholder for the contingent liability established under Subsection (a)(2). (V.T.I.C. Art. 16.08, Subsecs. (a), (b); Art. 16.10 (part); Art. 16.11 (part).)
Sec. 911.202. NONPAYMENT OF PREMIUMS OR ASSESSMENTS: FILING OF ACTION. (a) A farm mutual insurance company may bring an action in the county in which the company's principal office is located against a policyholder who defaults on the payment of a premium or an assessment.
(b) The company is entitled to judgment against the policyholder for:
(1) delinquent premiums or assessments;
(2) foreclosure of the lien described by Section 911.201; and
(3) the costs of an action, including a reasonable attorney's fee. (V.T.I.C. Art. 16.10 (part).)
Sec. 911.203. POLICYHOLDER LIABILITY. A policyholder is liable for the losses of a farm mutual insurance company only as provided by the company's constitution and bylaws, and only in proportion to the amount that the premium or assessment for the policyholder's policy bears to the total amount of premiums or assessments for all policies written by the company in the class to which the policyholder's policy belongs. (V.T.I.C. Art. 16.11 (part).)
[Sections 911.204-911.250 reserved for expansion]
SUBCHAPTER F. AGENTS
Sec. 911.251. LICENSING AND APPOINTMENT OF CERTAIN AGENTS. (a) An individual or firm may not solicit, write, sign, execute, or deliver insurance policies, bind insurance risks, collect premiums, or otherwise act on behalf of a farm mutual insurance company in the capacity of a local recording agent in the solicitation or sale of crop insurance unless the individual or firm is licensed under Article 21.14.
(b) A farm mutual insurance company may not appoint and act through an agent who qualifies for a license as an agricultural insurance agent under Article 21.14-2. (V.T.I.C. Art. 16.24A.)
[Sections 911.252-911.300 reserved for expansion]
SUBCHAPTER G. REGULATION OF FARM MUTUAL INSURANCE COMPANY;
FINANCIAL REQUIREMENTS
Sec. 911.301. GENERAL OPERATING REQUIREMENTS. (a) In this section, "rural property" means property located outside an area of land subject to the taxing authority of a municipality with a population of more than 2,500.
(b) A farm mutual insurance company shall:
(1) maintain a majority of the company's total insurance in force on rural property at all times the insurance is written; and
(2) operate on a regular and special assessment basis.
(c) Except as otherwise approved by the commissioner, a farm mutual insurance company may not use more than 33 percent of the company's gross income for expenses.
(d) Property that is rural property at the time the property is originally insured continues to be classified as rural property if:
(1) the policy or policies that insure the property are written by the same farm mutual insurance company; and
(2) the coverage continues in effect without lapse of coverage for more than 60 days. (V.T.I.C. Art. 16.01, Subsec. (c) (part).)
Sec. 911.302. LOCATION OF BUSINESS. (a) Except as provided by Subsection (b), a farm mutual insurance company may write insurance in:
(1) the county in which the company's home office is located at the time of incorporation and in any county adjoining the county in and for which the company is organized;
(2) any county in which another farm mutual insurance company is not organized; and
(3) any county in this state if the company's reserve fund exceeds $200,000 in cash or securities in which the reserve fund of a stock fire insurance company may be invested.
(b) This section does not apply to a farm mutual insurance company organized and operating in this state under a certificate of authority issued before May 21, 1973, under former Chapter 16 of this code. (V.T.I.C. Art. 16.07.)
Sec. 911.303. REINSURANCE. (a) A farm mutual insurance company may reinsure the company's risks with another company against any hazard against which the farm mutual insurance company is permitted to insure.
(b) The farm mutual insurance company may contract for mutual or reciprocal reinsurance with another company on the mutual or cooperative plan. The company may write or assume the reinsurance on the risks of the other company only if the other company reinsures the risks of the farm mutual insurance company. The farm mutual insurance company may write or assume the reinsurance only on property that the company is authorized to insure and that is located in this state.
(c) A farm mutual insurance company that reinsures another company's property is liable for the losses of the other company only as specified in the contract of interinsurance. The farm mutual insurance company does not become a member or partner of the other company as a result of the reinsurance.
(d) A farm mutual insurance company may pay or collect additional assessments or premiums for the purpose of a contract described by Subsection (b). (V.T.I.C. Art. 16.17.)
Sec. 911.304. ANNUAL REPORTS REQUIRED. (a) A farm mutual insurance company shall annually prepare a written report as required by this section and submit the report to the company's policyholders.
(b) The annual report must show:
(1) the rate and total amount of premiums or assessments paid during the year for the policyholders' insurance;
(2) the company's operating expenses; and
(3) the name of each claimant and the amount paid for each loss suffered, except as provided by Subsection (c).
(c) The company is not required to report the names of claimants and the amounts paid to claimants in one class of insurance to the policyholders in another class of insurance, unless the policyholders in the other class are liable for the losses of the class in which the claimants are members.
(d) The company shall make available to each policyholder a copy of the annual report at the time and in the manner prescribed by the company's bylaws.
(e) A farm mutual insurance company shall make annual reports to the department as required by the commissioner or by law. (V.T.I.C. Art. 16.18.)
Sec. 911.305. EXAMINATION OF COMPANY. The department shall examine each farm mutual insurance company as often as the department determines necessary. (V.T.I.C. Art. 16.19.)
Sec. 911.306. SOLVENCY REQUIREMENTS. (a) A farm mutual insurance company is solvent if:
(1) the company's assets, including the policyholders' contingent liability for the company's losses, are reasonably sufficient to pay the company's losses according to the terms of the policies; and
(2) the company's required unencumbered surplus, if any, has not been impaired in excess of 16-2/3 percent of the required unencumbered surplus.
(b) A company that is solvent as provided by this section may continue to engage in the business of insurance. (V.T.I.C. Art. 16.20.)
Sec. 911.307. RESERVE REQUIREMENTS. (a) A farm mutual insurance company's board of directors may provide for the accumulation of reserve funds.
(b) The company shall invest the reserve funds in the same type of securities in which the reserve funds of other fire insurance companies are required to be invested by law. (V.T.I.C. Art. 16.15.)
Sec. 911.308. SURPLUS REQUIREMENTS. (a) A farm mutual insurance company organized between January 1, 1955, and May 21, 1973, shall maintain an unencumbered surplus of $2 for each $100 of insurance in force or an unencumbered surplus of $200,000, whichever amount is less.
(b) A farm mutual insurance company organized under this chapter on or after May 21, 1973, shall maintain an unencumbered surplus in cash of $2 for each $100 of insurance in force or an unencumbered surplus of $200,000, whichever amount is greater.
(c) A company described by Subsection (b) shall invest the minimum unencumbered surplus as provided by Section 822.204. The company may invest funds in excess of the minimum unencumbered surplus as provided by Article 2.10.
(d) A company described by Subsection (b) shall, without delay, restore the minimum unencumbered surplus if the surplus is impaired. The department shall proceed as provided by Section 5, Article 1.10. (V.T.I.C. Art. 16.06 (part); Art. 16.25.)
CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 912.001. DEFINITIONS
Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS
Sec. 912.003. FEES
Sec. 912.004. FORMATION OF NEW COUNTY MUTUAL COMPANY
PROHIBITED
[Sections 912.005-912.050 reserved for expansion]
SUBCHAPTER B. ORGANIZATION OF COUNTY MUTUAL INSURANCE
COMPANY; DIRECTORS
Sec. 912.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION
ACT
Sec. 912.052. ELIGIBILITY OF BOARD OF DIRECTORS; TERM
Sec. 912.053. GENERAL POWERS OF BOARD OF DIRECTORS
Sec. 912.054. AUTHORITY TO BORROW MONEY
Sec. 912.055. CHARTER AND ARTICLES OF INCORPORATION
Sec. 912.056. CREATION OF LOCAL CHAPTERS AND DISTRICTS
Sec. 912.057. POLICYHOLDER MEETINGS
Sec. 912.058. VOTING BY POLICYHOLDERS
Sec. 912.059. AMENDMENT TO BYLAWS
Sec. 912.060. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS
Sec. 912.061. APPLICATION FOR EXTENSION OF CHARTER;
TERM
[Sections 912.062-912.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 912.101. OPERATION UNDER CERTIFICATE OF AUTHORITY
Sec. 912.102. AUTHORITY TO ENGAGE IN BUSINESS
[Sections 912.103-912.150 reserved for expansion]
SUBCHAPTER D. POLICIES AND COVERAGE
Sec. 912.151. KINDS OF INSURANCE AUTHORIZED
Sec. 912.152. POLICY FORMS
Sec. 912.153. CONTRACT TERMS: INCORPORATION OF BYLAWS
Sec. 912.154. AMOUNT OF INSURANCE UNDER MULTIPLE HAZARDS
POLICY
Sec. 912.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY
Sec. 912.156. CONTESTING CLAIM FOR CERTAIN PURPOSES
PROHIBITED
Sec. 912.157. DENIAL OF CLAIM: NOTICE REQUIRED
[Sections 912.158-912.200 reserved for expansion]
SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS
Sec. 912.201. SCHEDULE OF CHARGES
Sec. 912.202. PAYMENT OF PREMIUM OR ASSESSMENT
Sec. 912.203. NONPAYMENT OF PREMIUM OR ASSESSMENT:
FILING OF ACTION
Sec. 912.204. POLICYHOLDER LIABILITY
[Sections 912.205-912.250 reserved for expansion]
SUBCHAPTER F. AGENTS
Sec. 912.251. LICENSING AND APPOINTMENT OF AGENTS
Sec. 912.252. OVERCHARGING OR MISREPRESENTATION BY AGENT:
REVOCATION OF LICENSE
Sec. 912.253. OVERCHARGING OR MISREPRESENTATION BY AGENT;
CRIMINAL PENALTY
[Sections 912.254-912.300 reserved for expansion]
SUBCHAPTER G. REGULATION OF COUNTY MUTUAL
INSURANCE COMPANY; FINANCIAL REQUIREMENTS
Sec. 912.301. REPORT REGARDING CONDITION OF COMPANY
Sec. 912.302. ANNUAL STATEMENT FEE
Sec. 912.303. BOOKS AND RECORDS
Sec. 912.304. REINSURANCE
Sec. 912.305. SECURITY DEPOSIT
Sec. 912.306. REQUIRED BONDS
Sec. 912.307. RESERVE REQUIREMENTS
Sec. 912.308. AMOUNT AND INVESTMENT OF SURPLUS
Sec. 912.309. POLICYHOLDER LOANS TO COMPANY
[Sections 912.310-912.700 reserved for expansion]
SUBCHAPTER O. SUPERVISORY INTERVENTION; DISSOLUTION
Sec. 912.701. NOTICE OF INSOLVENCY, HAZARD, OR FAILURE
TO COMPLY WITH LAW
Sec. 912.702. COMPLIANCE WITH NOTICE REQUIREMENTS;
CONSEQUENCES OF FAILURE
Sec. 912.703. FAILURE TO COMPLY
Sec. 912.704. COMMISSIONER'S ACTION WHEN COMPANY CANNOT
CONTINUE BUSINESS
Sec. 912.705. REPORT TO ATTORNEY GENERAL
Sec. 912.706. COST OF CONSERVATOR'S SERVICES
[Sections 912.707-912.750 reserved for expansion]
SUBCHAPTER P. DISCIPLINARY ACTION AND PROCEDURES IN GENERAL
Sec. 912.751. OFFICER OR DIRECTOR UNWORTHY OF TRUST:
REMOVAL AND REVOCATION OF CERTIFICATE OF
AUTHORITY
Sec. 912.752. FRAUDULENT OPERATION OR IMPROPER CONTESTS:
REVOCATION OF CERTIFICATE OF AUTHORITY
Sec. 912.753. TIME LIMIT TO APPEAL
[Sections 912.754-912.800 reserved for expansion]
SUBCHAPTER Q. GENERAL CRIMINAL PENALTIES
Sec. 912.801. VIOLATION OF CHAPTER; CRIMINAL PENALTY
Sec. 912.802. CONVERSION; CRIMINAL PENALTY
Sec. 912.803. UNLAWFUL DIVERSION OF FUNDS; CRIMINAL PENALTY
Sec. 912.804. FALSE AFFIDAVIT; CRIMINAL PENALTY
CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 912.001. DEFINITIONS. In this chapter:
(1) "Member" includes a policyholder or another person who is insured by a county mutual insurance company.
(2) "Policy" includes a certificate or contract of insurance, certificate of membership, or other document through which insurance is effected or evidenced. (V.T.I.C. Art. 17.25, Sec. 3 (part).)
Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (a) Except as specifically provided by this chapter, a county mutual insurance company is exempt from the insurance laws of this state, including the flexible rating program under Article 5.101, unless the other law is specifically made applicable by its terms.
(b) A county mutual insurance company is subject to:
(1) Sections 38.001, 822.057(a)(3), (b), and (c), 822.058(b) and (c), and 822.204; and
(2) Articles 1.15, 1.15A, 1.16, 2.10, 4.10, 5.12, 5.37, 5.38, 5.39, 5.40, 5.49, 21.21, and 21.49. (V.T.I.C. Art. 17.22.)
Sec. 912.003. FEES. The department shall charge and collect a fee in the amount of $1 for the issuance of a county mutual insurer's certificate of authority. (V.T.I.C. Art. 17.21 (part).)
Sec. 912.004. FORMATION OF NEW COUNTY MUTUAL COMPANY PROHIBITED. A new county mutual insurance company may not be formed under this chapter. (V.T.I.C. Art. 17.02 (part).)
[Sections 912.005-912.050 reserved for expansion]
SUBCHAPTER B. ORGANIZATION OF COUNTY MUTUAL INSURANCE
COMPANY; DIRECTORS
Sec. 912.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (a) Except to the extent of any conflict with this code, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a county mutual insurance company. The commissioner has each power and duty of, and shall perform each act to be performed by, the secretary of state under that Act with respect to county mutual insurance companies.
(b) On advance approval of the commissioner, a county mutual insurance company may pay dividends to its members. (V.A.C.S. Art. 1396-10.04, Sec. B (part).)
Sec. 912.052. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (a) An individual is eligible to serve as a director of a county mutual insurance company if the individual is a policyholder who maintains insurance coverage in the amount of at least $1,000 written by the company on the individual's property.
(b) Except as otherwise provided by the company's bylaws, a director serves for a term of one year or until the director's successor qualifies for office. (V.T.I.C. Art. 17.12.)
Sec. 912.053. GENERAL POWERS OF BOARD OF DIRECTORS. The board of directors of a county mutual insurance company has the powers provided by the company's charter. (V.T.I.C. Art. 17.13.)
Sec. 912.054. AUTHORITY TO BORROW MONEY. (a) The board of directors of a county mutual insurance company may borrow money in an amount determined to be necessary to pay the company's accrued or unaccrued losses.
(b) The board may pledge as security for a loan the assets of the company, including the contingent liability of its policyholders. (V.T.I.C. Art. 17.10.)
Sec. 912.055. CHARTER AND ARTICLES OF INCORPORATION. The charter and articles of incorporation of a county mutual insurance company must state:
(1) the name of the company, which must include the words "County Mutual Insurance Company";
(2) the location of the principal office of the association; and
(3) the number of the directors, which must be at least five. (V.T.I.C. Art. 17.04 (part).)
Sec. 912.056. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (a) A county mutual insurance company's bylaws may provide for:
(1) the organization of local chapters to transact the company's business; and
(2) the creation of districts in and for which directors may be elected.
(b) The bylaws may also provide that delegates from the company's local chapters are the company's supreme governing body.
(c) The company may consider the hazards against which the company insures and the company's classes of risks and territory of operation in organizing the local chapters and creating the districts. (V.T.I.C. Art. 17.07.)
Sec. 912.057. POLICYHOLDER MEETINGS. (a) A county mutual insurance company shall hold a policyholder meeting to elect directors and transact business at the time and place and in the manner prescribed by the company's bylaws.
(b) A special meeting of a company's policyholders may be called by:
(1) the president, the general manager, or one-third of the company's directors; or
(2) the commissioner. (V.T.I.C. Art. 17.15.)
Sec. 912.058. VOTING BY POLICYHOLDERS. (a) Each policyholder of a county mutual insurance company is entitled to only one vote at a policyholders' meeting.
(b) A policyholder may not vote by proxy unless the company's bylaws specifically authorize voting in that manner. (V.T.I.C. Art. 17.14.)
Sec. 912.059. AMENDMENT TO BYLAWS. (a) A majority of the members of a county mutual insurance company, either in person or by proxy when ratified by the board of directors, may amend the company's bylaws at a regular meeting or at a special meeting called for that purpose.
(b) Notice of a regular or special meeting at which an amendment to the bylaws will be considered must be mailed or delivered personally to each member.
(c) An amendment to the bylaws is not effective until approved by the commissioner as meeting the requirements of this chapter. (V.T.I.C. Art. 17.25, Sec. 13.)
Sec. 912.060. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. A county mutual insurance company may provide in its bylaws that a local chapter or an officer or agent elected by the local chapter may not waive a provision of the bylaws. (V.T.I.C. Art. 17.24.)
Sec. 912.061. APPLICATION FOR EXTENSION OF CHARTER; TERM. (a) Before a county mutual insurance company's charter or extension of the charter expires, the company may apply to the department for an extension of the charter for a term of 50 years from the date the charter would otherwise expire.
(b) The application for an extension must:
(1) demonstrate that the application was authorized either by a two-thirds vote of the company's directors or by a majority vote at a policyholders' meeting;
(2) state in full the charter to be extended;
(3) state the period for which the charter is to be extended;
(4) be signed and acknowledged by the president and secretary of the company; and
(5) be accompanied by a fee of $50.
(c) A company whose charter is extended retains the rights, privileges, and immunities granted a county mutual insurance company by this chapter. (V.T.I.C. Art. 17.19.)
[Sections 912.062-912.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 912.101. OPERATION UNDER CERTIFICATE OF AUTHORITY. A county mutual insurance company engages in the business of insurance under a certificate of authority issued by the department. (V.T.I.C. Art. 17.21, Sec. (a) (part).)
Sec. 912.102. AUTHORITY TO ENGAGE IN BUSINESS. A county mutual insurance company may engage in the business of insurance in accordance with this chapter and other applicable laws only if:
(1) the company was formed before September 6, 1955, and was actively engaged in the business of insurance on that date; or
(2) the company was formed under a permit to solicit insurance issued before September 6, 1955. (V.T.I.C. Art. 17.02 (part).)
[Sections 912.103-912.150 reserved for expansion]
SUBCHAPTER D. POLICIES AND COVERAGE
Sec. 912.151. KINDS OF INSURANCE AUTHORIZED. (a) A county mutual insurance company that qualifies to write casualty lines for statewide operation may write all lines of automobile insurance. The company may not assume a risk on any one hazard that is greater than five percent of its assets, unless the company promptly reinsures the excess amount of risk.
(b) A county mutual insurance company may insure property against loss or damage by:
(1) fire, lightning, gas explosion, theft, windstorm, and hail or for any combination of these hazards; or
(2) any other hazard against which any other fire or windstorm insurance company operating in this state may write insurance on property described by Subsection (c).
(c) Unless restricted by its charter, the company may write insurance against the hazards described by Subsection (b) on:
(1) a rural or urban dwelling and attendant outhouses and yard buildings;
(2) the contents, for home and personal use, of a rural or urban dwelling, an attendant outhouse, or a yard building, including a family vehicle, musical instrument, and library;
(3) a barn or other farm, dairy, truck garden, hennery, or ranch building and any other improvement;
(4) a vehicle, harness, implement, tool, or machinery of any description used on and about a farm, truck garden, dairy, hennery, or ranch;
(5) fruit and products, other than growing crops, and any fowl, livestock, or domestic animals that are produced, raised, grown, kept, or used on a farm, truck garden, dairy, hennery, or ranch;
(6) a church house, country school house, country lodge room, or country recreation hall, other than a road house or public dance hall; and
(7) the contents of a church house, country school house, country lodge room, or country recreation hall. (V.T.I.C. Art. 17.01 (part); Art. 17.25, Sec. 1.)
Sec. 912.152. POLICY FORMS. (a) A county mutual insurance company is subject to Articles 5.06 and 5.35.
(b) The commissioner, in accordance with Article 5.35, may adopt for use by county mutual insurance companies uniform policy forms that differ from the forms adopted for use by other companies and shall prescribe the conditions under which a county mutual insurance company:
(1) may use the policy forms adopted under this subsection; or
(2) shall use the policy forms adopted for other companies. (V.T.I.C. Art. 17.25, Sec. 5.)
Sec. 912.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (a) A county mutual insurance company's bylaws are part of each contract between the company and an insured.
(b) Each policy issued by the company must state that the company's bylaws are part of the contract. (V.T.I.C. Art. 17.23.)
Sec. 912.154. AMOUNT OF INSURANCE UNDER MULTIPLE HAZARDS POLICY. The amount of risk or insurance coverage in a policy that insures a risk against more than one hazard is the maximum loss the county mutual insurance company may sustain under the policy at any one time, regardless of the number of hazards against which the company insures. (V.T.I.C. Art. 17.25, Sec. 20 (part).)
Sec. 912.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. (a) The county mutual insurance company's bylaws may authorize the company to require, at its option, that all or a percentage of the money paid for a loss be used to replace or repair the damaged or destroyed property. The requirement may apply equally to personal and real property, including personal and real property exempt from execution, such as a homestead or a building on the homestead. The company may provide in its bylaws that the requirements of Section 862.053 do not apply to its insurance policies.
(b) This section does not apply to a company that meets the requirements of Section 912.308(a)(3), but such a company is subject to Sections 883.154, 883.155, and 883.156. (V.T.I.C. Art. 17.06 (part).)
Sec. 912.156. CONTESTING CLAIM FOR CERTAIN PURPOSES PROHIBITED. (a) In this section, "full payment" means payment of the full amount of a loss actually sustained on the occurrence of the contingency against which the insurance coverage is obtained, not to exceed the maximum amount stated in the policy.
(b) A county mutual insurance company may not contest a claim:
(1) only for delay or a captious or inconsequential reason; or
(2) to force a settlement for less than full payment. (V.T.I.C. Art. 17.25, Secs. 3 (part), 12 (part).)
Sec. 912.157. DENIAL OF CLAIM: NOTICE REQUIRED. (a) A county mutual insurance company shall notify a claimant of the company's intent to deny liability on a claim not later than the 60th day after the date the company receives due proofs that the claim will not be paid.
(b) A company that does not notify a claimant as required by Subsection (a) is presumed as a matter of law to have accepted liability on the claim. (V.T.I.C. Art. 17.25, Sec. 12 (part).)
[Sections 912.158-912.200 reserved for expansion]
SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS
Sec. 912.201. SCHEDULE OF CHARGES. A county mutual insurance company shall file with the department a schedule of the amounts the company charges a policyholder or an applicant for a policy, regardless of the term the company uses to refer to those charges, including "rate," "policy fee," "inspection fee," "membership fee," or "initial charge." (V.T.I.C. Art. 17.25, Sec. 6.)
Sec. 912.202. PAYMENT OF PREMIUM OR ASSESSMENT. (a) A county mutual insurance company's bylaws must:
(1) state the time and manner of the levy and payment of a premium or assessment for policies written by the company;
(2) in addition to the regular premium or assessment under Subdivision (1), establish the contingent liability of a policyholder for all losses accrued while a policy is in force in the amount of $2 for each $100 of insurance coverage; and
(3) state the time and manner of payment of a policyholder's contingent liability established under Subdivision (2).
(b) As required by its bylaws, a county mutual insurance company shall establish and levy premiums and assessments, including the contingent liability of a policyholder, for all insurance written by the company.
(c) A policyholder shall pay premiums and assessments as required by the company's bylaws.
(d) The premium or assessment for a policy shall be secured by a lien on each item of real or personal property, other than a homestead, covered by the policy, including the land on which an insured building is located. The lien remains on the property while the insured owns the property.
(e) Subsection (a) does not apply to a company that meets the requirements of Section 912.308(a)(3), but such a company is subject to Sections 883.154, 883.155, and 883.156. (V.T.I.C. Art. 17.06 (part); Art. 17.08 (part); Art. 17.25, Sec. 20 (part).)
Sec. 912.203. NONPAYMENT OF PREMIUM OR ASSESSMENT: FILING OF ACTION. (a) A county mutual insurance company may bring an action in the home county of the company against a policyholder who defaults on the payment of an assessment or premium.
(b) The company is entitled to judgment against the policyholder for:
(1) delinquent premiums or assessments;
(2) foreclosure of the lien described by Section 912.202; and
(3) the costs of an action, including a reasonable attorney's fee in the amount of at least $5. (V.T.I.C. Art. 17.08 (part).)
Sec. 912.204. POLICYHOLDER LIABILITY. A policyholder is liable for the losses of a county mutual insurance company only as provided by Section 912.202 and the company's bylaws, and only in proportion to the amount that the premium or assessment for the policyholder's policy bears to the total amount of premiums or assessments for all policies written by the company in the class to which the policyholder's policy belongs. (V.T.I.C. Art. 17.09.)
[Sections 912.205-912.250 reserved for expansion]
SUBCHAPTER F. AGENTS
Sec. 912.251. LICENSING AND APPOINTMENT OF AGENTS. An agent or solicitor for a county mutual insurance company must be licensed and appointed as provided by Articles 21.07 and 21.14. (V.T.I.C. Art. 17.25, Sec. 9.)
Sec. 912.252. OVERCHARGING OR MISREPRESENTATION BY AGENT: REVOCATION OF LICENSE. (a) The department shall revoke the license of an agent or solicitor of a county mutual insurance company convicted of an offense under Section 912.253.
(b) The department may not issue another license to an agent or solicitor whose license is revoked under this section. (V.T.I.C. Art. 17.25, Sec. 15 (part).)
Sec. 912.253. OVERCHARGING OR MISREPRESENTATION BY AGENT; CRIMINAL PENALTY. (a) An agent or solicitor of a county mutual insurance company commits an offense if the person:
(1) charges an amount for a policy that is greater than the amount in the schedule of charges filed with the department; or
(2) commits misrepresentation.
(b) An offense under this section is punishable by a fine of not less than $50 or more than $500. (V.T.I.C. Art. 17.25, Sec. 15 (part).)
[Sections 912.254-912.300 reserved for expansion]
SUBCHAPTER G. REGULATION OF COUNTY MUTUAL
INSURANCE COMPANY; FINANCIAL REQUIREMENTS
Sec. 912.301. REPORT REGARDING CONDITION OF COMPANY. (a) The commissioner may, at any time the commissioner determines advisable, compel written reports from a county mutual insurance company regarding the company's condition.
(b) The commissioner may require that the report be verified under oath by a responsible officer of the company. (V.T.I.C. Art. 17.25, Sec. 18 (part).)
Sec. 912.302. ANNUAL STATEMENT FEE. The department shall charge and the comptroller shall collect a fee of $20 for the filing of an annual statement by a county mutual insurance company. (V.T.I.C. Art. 17.21, Sec. (b).)
Sec. 912.303. BOOKS AND RECORDS. (a) A county mutual insurance company shall maintain the company's books and records in a form and manner that accurately reflects the condition of the company or the facts essential to the company's faithful and effective operation.
(b) The company shall use forms or systems that most effectively serve the purposes of this section. (V.T.I.C. Art. 17.25, Sec. 8.)
Sec. 912.304. REINSURANCE. (a) A county mutual insurance company may reinsure any or all of the company's risks with another company against any hazard against which the county mutual insurance company is permitted to insure.
(b) The county mutual insurance company may contract for mutual or reciprocal reinsurance with another company on the mutual or cooperative plan. The company may write or assume the reinsurance on the risks of the other company only if the other company reinsures the risks of the county mutual insurance company. The county mutual insurance company may write or assume the reinsurance only on property that the company is authorized to insure and that is located in this state.
(c) A county mutual insurance company that reinsures another company's property is liable for the losses of the other company only as specified in the contract of interinsurance. The county mutual insurance company does not become a member or partner of the other company as a result of the reinsurance.
(d) A county mutual insurance company may pay or collect additional assessments or premiums for the purpose of a contract described by Subsection (b). (V.T.I.C. Art. 17.20.)
Sec. 912.305. SECURITY DEPOSIT. (a) A county mutual insurance company shall maintain with the comptroller through the department a deposit in cash or, subject to the commissioner's approval, convertible securities. The deposit must be equal to:
(1) the largest amount assumed by the company on any one risk; or
(2) on a demonstration of reinsurance acceptable to the commissioner, the largest amount retained by the company on any one risk after reinsurance.
(b) The deposit is liable for the payment of all judgments against the company and is subject to garnishment after final judgment against the company. The company, on the commissioner's demand, must immediately replenish the deposit when the deposit is impounded or depleted. If the company does not immediately replenish the deposit, the company may be regarded as insolvent.
(c) If a county mutual insurance company makes a statement, including a statement contained in an advertisement, letter, or literature, that the company deposited cash or securities as required by this section, the company must also state in full:
(1) the purpose, exact amount, and character of the deposit; and
(2) the conditions under which the deposit was made. (V.T.I.C. Art. 17.25, Sec. 4.)
Sec. 912.306. REQUIRED BONDS. (a) A county mutual insurance company shall obtain a bond for:
(1) the officer responsible for handling the funds of the company's members; and
(2) all other office employees who may have access to the company's funds.
(b) The bonds required under this section must:
(1) be with a surety authorized by the department to engage in business in this state;
(2) be made payable to the department for the use and benefit of the company's members; and
(3) obligate the principal and surety to pay pecuniary losses that the company sustains through an act of fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, or wilful misapplication, regardless of whether the act is committed by the officer or employee directly and alone, or in cooperation with another person.
(c) A bond under this section must:
(1) be in an amount that is at least the greater of $1,000 or the amount of cash assets on hand, but not more than $20,000, if the bond covers the officer; or
(2) be in an amount established by the department that is at least $1,000 but not more than $5,000, if the bond covers office employees.
(d) One or more persons may recover on a bond under this section until the bond is exhausted. (V.T.I.C. Art. 17.25, Sec. 11.)
Sec. 912.307. RESERVE REQUIREMENTS. (a) A county mutual insurance company shall maintain unearned premium reserves as provided by Section 862.102.
(b) The company shall invest the unearned premium reserves and any other type of reserves authorized by the company's board of directors in the same type of securities in which the reserve funds of insurance companies engaged in the same kind of business are required to be invested by law. (V.T.I.C. Art. 17.11 (part).)
Sec. 912.308. AMOUNT AND INVESTMENT OF SURPLUS. (a) A county mutual insurance company shall maintain an unencumbered surplus which may be invested only in items listed in Section 822.204. The unencumbered surplus must be at least:
(1) $25,000, if the company is organized to write insurance coverage locally in only the county of its domicile;
(2) $50,000, if the company is organized to write insurance coverage in only the county of its domicile and any adjacent county; or
(3) an amount equal to the aggregate of the minimum capital and minimum surplus required under Sections 822.054, 822.202, 822.210, and 822.211, for a fire insurance company if the county mutual insurance company is organized to write insurance coverage statewide.
(b) A county mutual insurance company is subject to Sections 822.203, 822.205, 822.210, and 822.212 and Section 5, Article 1.10. (V.T.I.C. Arts. 17.11 (part), 17.16.)
Sec. 912.309. POLICYHOLDER LOANS TO COMPANY. (a) A policyholder may loan to a county mutual insurance company money as necessary:
(1) for the company to engage in the company's business; or
(2) to enable the company to comply with a requirement of this chapter, including the unencumbered surplus requirement under Section 912.308.
(b) Subject to the approval of the commissioner, the county mutual insurance company may repay a loan and agreed interest, at an annual rate not to exceed 10 percent, only from the surplus remaining after the company provides for the company's reserves, other liabilities, and required surplus.
(c) A loan under this section or interest on a loan is not otherwise a liability or claim against the company or any of its assets.
(d) A county mutual insurance company may not pay a commission, promotion expense, or other bonus in connection with a loan made to the company.
(e) A county mutual insurance company shall report in its annual statement the amount of each loan made to the company. (V.T.I.C. Art. 17.17.)
[Sections 912.310-912.700 reserved for expansion]
SUBCHAPTER O. SUPERVISORY INTERVENTION; DISSOLUTION
Sec. 912.701. NOTICE OF INSOLVENCY, HAZARD, OR FAILURE TO COMPLY WITH LAW. The commissioner shall notify a county mutual insurance company of the commissioner's determination if, at any time after notice and hearing, the commissioner determines that:
(1) the company is insolvent;
(2) the company's condition renders the continuance of its business hazardous to the public or its policyholders; or
(3) the company has exceeded its powers or not complied with the law. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
Sec. 912.702. COMPLIANCE WITH NOTICE REQUIREMENTS; CONSEQUENCES OF FAILURE. A county mutual insurance company shall, under the supervision of the commissioner, comply with the commissioner's requirements not later than the 30th day after the date the company receives notice under Section 912.701. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
Sec. 912.703. FAILURE TO COMPLY. (a) If a county mutual insurance company does not comply as required by Section 912.702, the commissioner or a conservator appointed by the commissioner shall immediately take charge of the company, including all of the company's property.
(b) The conservator under the direction of the commissioner shall operate the county mutual insurance company pending the election of new directors and officers by the company's members if the commissioner is satisfied that the company can best serve its policyholders and the public through that operation. The commissioner shall determine the manner of election of the new directors and officers. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
Sec. 912.704. COMMISSIONER'S ACTION WHEN COMPANY CANNOT CONTINUE BUSINESS. If the commissioner determines that the county mutual insurance company cannot satisfactorily continue business in the interest of its policyholders under the conservator, the commissioner shall, in the commissioner's discretion:
(1) reinsure the company's outstanding liabilities with a solvent company authorized to engage in the business of insurance in this state;
(2) direct the conservator to liquidate the company; or
(3) give notice to the attorney general as provided by the laws relating to insurance corporations. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
Sec. 912.705. REPORT TO ATTORNEY GENERAL. (a) The commissioner shall report to the attorney general:
(1) the completion of the reinsurance or liquidation of all of the liabilities of a county mutual insurance company; or
(2) the commissioner's approval of the merger, transfer, or consolidation of the membership of one company with another.
(b) The commissioner may approve a merger or transfer of the membership of one county mutual insurance company with another only if the company assuming the transferred or merged members is operating under the commissioner's supervision.
(c) After receiving a report under this section, the attorney general shall take the action necessary to effect the forfeiture of the charter of the county mutual insurance company. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
Sec. 912.706. COST OF CONSERVATOR'S SERVICES. The commissioner shall determine the cost incident to a conservator's services under this subchapter. That cost is a charge against the assets of the county mutual insurance company to be paid as the commissioner determines. (V.T.I.C. Art. 17.25, Sec. 14 (part).)
[Sections 912.707-912.750 reserved for expansion]
SUBCHAPTER P. DISCIPLINARY ACTION AND PROCEDURES IN GENERAL
Sec. 912.751. OFFICER OR DIRECTOR UNWORTHY OF TRUST: REMOVAL AND REVOCATION OF CERTIFICATE OF AUTHORITY. (a) After notice and hearing, the commissioner shall order the removal of an officer or director of a county mutual insurance company holding a certificate of authority if the officer or director is found unworthy of the trust or confidence of the public.
(b) If a county mutual insurance company does not remove an officer or director as required by an order issued under Subsection (a), the commissioner shall:
(1) revoke the company's certificate of authority; and
(2) treat the company as insolvent. (V.T.I.C. Art. 17.25, Sec. 10 (part).)
Sec. 912.752. FRAUDULENT OPERATION OR IMPROPER CONTESTS: REVOCATION OF CERTIFICATE OF AUTHORITY. After notice and hearing, the commissioner shall revoke the certificate of authority of a county mutual insurance company that is:
(1) operating fraudulently; or
(2) improperly contesting the company's claims. (V.T.I.C. Art. 17.25, Sec. 12 (part).)
Sec. 912.753. TIME LIMIT TO APPEAL. An individual or a county mutual insurance company may appeal an order or a ruling of the commissioner under this chapter not later than the 60th day after the date of the order or ruling, in accordance with Subchapter D, Chapter 36. (V.T.I.C. Art. 17.25, Sec. 21 (part).)
[Sections 912.754-912.800 reserved for expansion]
SUBCHAPTER Q. GENERAL CRIMINAL PENALTIES
Sec. 912.801. VIOLATION OF CHAPTER; CRIMINAL PENALTY. (a) Except as otherwise provided by this subchapter, a person, including a director, officer, agent, employee, attorney at law, or attorney in fact of a county mutual insurance company, commits an offense if the person violates this chapter.
(b) An offense under this section is punishable by:
(1) a fine of not more than $500;
(2) confinement in jail for a term of not more than 180 days; or
(3) both a fine and confinement as provided by Subdivisions (1) and (2). (V.T.I.C. Art. 17.25, Sec. 19.)
Sec. 912.802. CONVERSION; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of a county mutual insurance company commits an offense if the person fraudulently takes or converts to the person's own use or secretes with the intent to take or convert to the person's own use, and with knowledge that the person is not entitled to receive it, any property or other thing of value of the company that is in the person's custody, control, or possession as a result of the person's office, directorship, agency, or employment or in any other manner.
(b) A director, officer, agent, employee, attorney at law, or attorney in fact of a county mutual insurance company commits an offense if the person pays or delivers property or another thing of value described by Subsection (a) to another person knowing that the person is not entitled to receive it.
(c) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than 10 years or less than 2 years. (V.T.I.C. Art. 17.25, Sec. 16.)
Sec. 912.803. UNLAWFUL DIVERSION OF FUNDS; CRIMINAL PENALTY. (a) A director, officer, agent, employee, attorney at law, or attorney in fact of a county mutual insurance company commits an offense if the person wilfully borrows, withholds, or diverts from its purpose in any manner all or part of a special fund that:
(1) belongs to or is under the control and management of the company; and
(2) is designated by law for that purpose.
(b) An offense under this section is punishable by imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than 10 years or less than 2 years. (V.T.I.C. Art. 17.25, Sec. 17.)
Sec. 912.804. FALSE AFFIDAVIT; CRIMINAL PENALTY. (a) An officer, director, agent, employee, attorney at law, or attorney in fact of a county mutual insurance company commits an offense if the person wilfully makes a false affidavit in connection with the requirements of this chapter.
(b) An offense under this section is punishable by:
(1) a fine of not more than $500; or
(2) confinement in jail or imprisonment in the institutional division of the Texas Department of Criminal Justice for a term of not more than two years. (V.T.I.C Art. 17.25, Sec. 18 (part).)
[Chapters 913-940 reserved for expansion]
SUBTITLE G. LLOYD'S PLAN AND RECIPROCAL
AND INTERINSURANCE EXCHANGES
CHAPTER 941. LLOYD'S PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 941.001. DEFINITIONS
Sec. 941.002. LLOYD'S PLAN INSURANCE AUTHORIZED; LIFE
INSURANCE PROHIBITED
Sec. 941.003. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICATION OF CERTAIN LAWS
Sec. 941.004. WITHDRAWAL FROM THE BUSINESS OF INSURANCE
[Sections 941.005-941.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF LLOYD'S PLAN
Sec. 941.051. FORMATION OF LLOYD'S PLAN
Sec. 941.052. ATTORNEY IN FACT
Sec. 941.053. DEPUTY OR SUBSTITUTE ATTORNEY IN FACT
Sec. 941.054. NAME OF LLOYD'S PLAN
[Sections 941.055-941.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 941.101. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 941.102. APPLICATION FOR CERTIFICATE OF AUTHORITY
Sec. 941.103. ISSUANCE OF CERTIFICATE OF AUTHORITY
[Sections 941.104-941.150 reserved for expansion]
SUBCHAPTER D. OPERATION, POWERS, AND DUTIES OF LLOYD'S PLAN
Sec. 941.151. LIABILITY OF UNDERWRITER
Sec. 941.152. LIABILITY OF ADDITIONAL OR SUBSTITUTED
UNDERWRITER
Sec. 941.153. ACCRUAL OF PROFITS
Sec. 941.154. ASSUMPTION OF RISK BY CERTAIN AFFILIATED
INSURERS
Sec. 941.155. PROMOTION OF LLOYD'S PLAN
Sec. 941.156. REINSURANCE PERMITTED
[Sections 941.157-941.200 reserved for expansion]
SUBCHAPTER E. FINANCIAL REQUIREMENTS
Sec. 941.201. REQUIRED NET ASSETS
Sec. 941.202. LIMITATION OF BUSINESS
Sec. 941.203. COMPUTATION OF RESERVE
Sec. 941.204. AUTHORIZED INVESTMENTS
Sec. 941.205. JOINT CONTROL OF MINIMUM ASSETS
Sec. 941.206. IMPAIRMENT OF ASSETS
[Sections 941.207-941.250 reserved for expansion]
SUBCHAPTER F. REGULATION OF LLOYD'S PLAN
Sec. 941.251. EXAMINATIONS
Sec. 941.252. ANNUAL REPORT
[Sections 941.253-941.300 reserved for expansion]
SUBCHAPTER G. FOREIGN LLOYD'S PLAN
Sec. 941.301. FOREIGN LLOYD'S PLAN; BOND OR
MINIMUM NET ASSETS REQUIRED
Sec. 941.302. BOND OF FOREIGN LLOYD'S PLAN
[Sections 941.303-941.350 reserved for expansion]
SUBCHAPTER H. CONVERSION TO CAPITAL STOCK INSURANCE COMPANY
Sec. 941.351. CONVERSION AUTHORIZED
Sec. 941.352. ADOPTION OF CONVERSION PLAN
Sec. 941.353. REQUIREMENTS OF CONVERSION PLAN
Sec. 941.354. COMMISSIONER APPROVAL OF CONVERSION PLAN
Sec. 941.355. CONVERSION OF MEMBER OF HOLDING COMPANY
SYSTEM
[Sections 941.356-941.700 reserved for expansion]
SUBCHAPTER O. PENALTIES
Sec. 941.701. REVOCATION OF CERTIFICATE OF AUTHORITY
Sec. 941.702. CRIMINAL PENALTY
CHAPTER 941. LLOYD'S PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 941.001. DEFINITIONS. In this chapter:
(1) "Affiliate" has the meaning described by Section 823.003.
(2) "Attorney in fact" means an attorney in fact authorized under a power of attorney to act for the underwriters of a Lloyd's plan.
(3) "Lloyd's plan" means an entity engaged in the business of writing insurance on the Lloyd's plan.
(4) "Underwriter" means an individual, partnership, or association of individuals that writes insurance on the Lloyd's plan. (V.T.I.C. Arts. 18.01 (part), 18.01-1 (part), 18.02 (part), 18.23A, Sec. (b); New.)
Sec. 941.002. LLOYD'S PLAN INSURANCE AUTHORIZED; LIFE INSURANCE PROHIBITED. (a) Except as provided by Subsection (b), a Lloyd's plan may write any kind of insurance that may be lawfully written in this state, including:
(1) fire insurance, including tornado, hail, crop, and floater insurance;
(2) automobile insurance, including fire, theft, transportation, property damage, collision liability, and tornado insurance;
(3) liability insurance;
(4) marine insurance;
(5) accident and health insurance;
(6) burglary insurance;
(7) plate glass insurance; and
(8) fidelity and surety bonds insurance.
(b) A Lloyd's plan may not write life insurance. (V.T.I.C. Arts. 18.01 (part), 18.01-1 (part), 18.03 (part).)
Sec. 941.003. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICATION OF CERTAIN LAWS. (a) Except as specifically provided in this chapter or another law, a Lloyd's plan is exempt from the insurance laws of this state.
(b) A Lloyd's plan is subject to:
(1) Article 1.15A;
(2) Subchapter A, Chapter 5;
(3) Articles 5.35, 5.38, 5.39, 5.40, and 5.49;
(4) Articles 21.21 and 21.49-8; and
(5) Sections 822.203, 822.205, 822.210, and 822.212.
(c) Subchapter M, Chapter 5, applies to rates for motor vehicle insurance written by a Lloyd's plan.
(d) Underwriters and their attorney in fact are subject to Sections 822.051, 822.057, 822.058, 822.059, 822.060, and 822.201, except that:
(1) the articles of agreement executed by the underwriters replaces the articles of incorporation; and
(2) the aggregate of the guaranty fund and unencumbered surplus of the Lloyd's plan constitutes capital structure for purposes of Section 822.060. (V.T.I.C. Arts. 5.01-2 (part), 18.04 (part), 18.05 (part), 18.23.)
Sec. 941.004. WITHDRAWAL FROM THE BUSINESS OF INSURANCE. (a) A Lloyd's plan may withdraw from the business of insurance only if the commissioner determines that adequate provision has been made, through reinsurance or other means, for:
(1) payment of all unadjusted losses of the Lloyd's plan; and
(2) reinsurance of all outstanding risks in favor of residents of this state or covering property located in this state.
(b) On compliance with the requirements of Subsection (a):
(1) any bond of the attorney in fact shall be released; and
(2) the commissioner shall release to the underwriters any net assets over which the commissioner has joint control. (V.T.I.C. Art. 18.18 (part).)
[Sections 941.005-941.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF LLOYD'S PLAN
Sec. 941.051. FORMATION OF LLOYD'S PLAN. (a) To write insurance on the Lloyd's plan, underwriters must:
(1) execute articles of agreement expressing the intent to write insurance; and
(2) comply with the requirements of this chapter.
(b) A Lloyd's plan must have at least 10 underwriters. (V.T.I.C. Arts. 18.01 (part), 18.01-1 (part), 18.03 (part).)
Sec. 941.052. ATTORNEY IN FACT. (a) The attorney in fact may execute insurance policies for the Lloyd's plan.
(b) The principal office of the attorney in fact must be maintained at the place designated by the underwriters in the articles of agreement. (V.T.I.C. Arts. 18.01-1 (part), 18.02 (part).)
Sec. 941.053. DEPUTY OR SUBSTITUTE ATTORNEY IN FACT. An appointed deputy attorney in fact or substitute attorney in fact for an attorney in fact holding a certificate of authority under this chapter and accepting powers of attorney from underwriters is authorized by the certificate of authority to:
(1) issue or make a policy or contract of insurance; and
(2) perform any other act incident to issuing or making a policy or contract of insurance. (V.T.I.C. Art. 18.14 (part).)
Sec. 941.054. NAME OF LLOYD'S PLAN. The name under which a Lloyd's plan engages in business:
(1) must contain the word "Lloyd's"; and
(2) may not be so similar to any name in use in this state as to be likely to confuse or deceive. (V.T.I.C. Art. 18.03 (part).)
[Sections 941.055-941.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 941.101. CERTIFICATE OF AUTHORITY REQUIRED. (a) An attorney in fact may not write insurance in this state or for residents of this state or covering property located in this state unless the attorney in fact holds a certificate of authority issued under this chapter.
(b) Except as otherwise provided by this chapter, an attorney in fact must:
(1) be a resident of this state; and
(2) maintain the attorney in fact's office in this state. (V.T.I.C. Art. 18.02 (part).)
Sec. 941.102. APPLICATION FOR CERTIFICATE OF AUTHORITY. (a) The attorney in fact shall file with the department a verified application for a certificate of authority that states:
(1) the name of the attorney in fact;
(2) the name under which the Lloyd's plan will engage in the business of insurance;
(3) the names and addresses of the underwriters;
(4) the location of the principal office; and
(5) the kinds of insurance to be written.
(b) The application must be accompanied by:
(1) a copy of each form of policy or contract under which insurance will be written;
(2) a copy of the form of the power of attorney under which the attorney in fact will act for and bind the underwriters;
(3) a copy of the articles of agreement executed by the underwriters and the attorney in fact;
(4) a financial statement showing in detail:
(A) assets held by the attorneys in fact, committee of underwriters, trustees, or other officers of the Lloyd's plan;
(B) liabilities incurred and outstanding; and
(C) income received and disbursements made by the attorney in fact;
(5) an instrument executed by each underwriter authorizing the attorney in fact to accept service of process for each underwriter in any action on a policy or contract of insurance; and
(6) an instrument from the attorney in fact that delegates to the commissioner the power of the attorney in fact to accept service of process.
(c) On filing the application, the attorney in fact shall pay to the department a fee of $10. A fee collected under this subsection shall be deposited to the credit of the Texas Department of Insurance operating account.
(d) Article 1.31A applies to a fee collected under Subsection (c). (V.T.I.C. Arts. 18.03 (part), 18.03-1 (part), 18.04 (part).)
Sec. 941.103. ISSUANCE OF CERTIFICATE OF AUTHORITY. On determination by the department that the underwriters and attorney in fact have complied with the law, the department shall, in accordance with Sections 801.001, 801.002, 801.051-801.055, 801.057, and 801.101, issue a certificate of authority to the attorney in fact. (V.T.I.C. Arts. 18.03-1 (part), 18.04 (part).)
[Sections 941.104-941.150 reserved for expansion]
SUBCHAPTER D. OPERATION, POWERS, AND DUTIES OF
LLOYD'S PLAN
Sec. 941.151. LIABILITY OF UNDERWRITER. (a) Subject to Subsection (c), an underwriter by contract with the persons insured may limit the underwriter's liability to the percentage of the loss that equals the ratio of the underwriter's subscription paid in cash or securities allowed by this chapter to the total guaranty fund contributed by all the underwriters.
(b) Subject to Subsection (c), an underwriter's total liability on all risks may be limited to the amount of the underwriter's subscription, as expressed in the underwriter's power of attorney and agreement with the attorney in fact.
(c) At least half of an underwriter's subscription must be paid or contributed to the guaranty fund in cash or admissible securities.
(d) An underwriter is responsible solely for the underwriter's liability as provided by the insurance contract. An underwriter is not liable as a partner. (V.T.I.C. Art. 18.13.)
Sec. 941.152. LIABILITY OF ADDITIONAL OR SUBSTITUTED UNDERWRITER. An additional or substituted underwriter is liable in the same manner and to the same extent as an original subscriber to the articles of agreement and power of attorney on file with the department. (V.T.I.C. Art. 18.14 (part).)
Sec. 941.153. ACCRUAL OF PROFITS. The profits of a Lloyd's plan may accrue to an underwriter only on the basis of the underwriter's actual investment in cash or convertible securities, without regard to any obligation or subscription of the underwriter to pay additional cash or securities in the future. (V.T.I.C. Art. 18.15.)
Sec. 941.154. ASSUMPTION OF RISK BY CERTAIN AFFILIATED INSURERS. An insurer who is subject to Article 5.26 may not directly or indirectly assume all or a substantial part of a risk covered by a policy written by a Lloyd's plan that is an affiliate of the insurer if the risk is written at a rate less than the rate that may be lawfully charged by:
(1) the insurer; or
(2) one of the insurer's affiliates that is subject to Article 5.26. (V.T.I.C. Art. 18.23A, Sec. (a).)
Sec. 941.155. PROMOTION OF LLOYD'S PLAN. (a) An individual, firm, or corporation may not be instrumental in organizing a Lloyd's plan if, in the organization of the Lloyd's plan, compensation is paid to the individual, firm, or corporation or to a representative of the individual, firm, or corporation for procuring underwriters or a guaranty fund for the Lloyd's plan unless the individual, firm, or corporation holds a permit issued by the department that authorizes the charging of a commission in connection with organizing the Lloyd's plan.
(b) Not more than 10 percent of the total amount of an underwriter's subscription to a Lloyd's plan may be paid to any person as a commission for the sale of units of or an interest in the Lloyd's plan or for procuring underwriters for the Lloyd's plan.
(c) This section applies to the continued organization or extension of a Lloyd's plan, if a commission is to be paid in connection with the organization or extension. With respect to a continued organization or extension of a Lloyd's plan, the commissioner may not refuse the permit because of the contemplated size or amount of the guaranty fund of the Lloyd's plan.
(d) After the permit has been granted, securities may not be accepted as contributions to the guaranty fund unless the securities have been approved in advance by the department as complying with this chapter with respect to the investment of the funds of a Lloyd's plan. (V.T.I.C. Art. 18.24, Secs. (1), (2), (4), (5).)
Sec. 941.156. REINSURANCE PERMITTED. This chapter does not prevent a domestic Lloyd's plan from reinsuring:
(1) the Lloyd's plan's excess lines with a solvent foreign Lloyd's plan acceptable to the department that does not hold a certificate of authority to engage in the business of insurance in this state; or
(2) any business from a foreign Lloyd's plan described by Subdivision (1). (V.T.I.C. Art. 18.21.)
[Sections 941.157-941.200 reserved for expansion]
SUBCHAPTER E. FINANCIAL REQUIREMENTS
Sec. 941.201. REQUIRED NET ASSETS. The department may not issue a certificate of authority to an attorney in fact unless the net assets contributed to the attorney in fact, a committee of underwriters, a trustee, or other officers as provided for in the articles of agreement constitute a guaranty fund and surplus over and above all of the Lloyd's plan's liabilities that is at least equal to the minimum capital stock and surplus required of a stock insurance company engaging in the same kinds of business. (V.T.I.C. Art. 18.05 (part).)
Sec. 941.202. LIMITATION OF BUSINESS. (a) Except as provided by Subsection (c), a Lloyd's plan may not assume or write insurance risks in this state, for residents of this state, or covering property located in this state that produce an amount of net premium income that exceeds 10 times the value of the net assets of the underwriters.
(b) If the insurance risks written or assumed by a Lloyd's plan produce a net premium income that exceeds the limit specified by Subsection (a), the Lloyd's plan may not write or assume an additional insurance risk until the net assets have been increased to a level that brings the net premium income produced by the additional insurance risk within that limit.
(c) The limit imposed by Subsection (a) does not apply to a Lloyd's plan if:
(1) the Lloyd's plan's net assets equal at least the amount of money required of a stock insurance company engaged in the same kind of business in this state; or
(2) the department determines that the Lloyd's plan, through reinsurance or other contracts with other responsible and solvent insurers, has reduced the net lines at risk carried by the Lloyd's plan so that its operations are safe and its solvency is not in danger.
(d) An attorney in fact may not assume an insurance risk that exceeds one-tenth of the sum of the amount of the net assets of the underwriters as described in this subchapter and the amount of the additional liability assumed by the individual underwriters in the articles of agreement and in policies or contracts of insurance, unless the excess insurance risk is promptly reinsured. (V.T.I.C. Arts. 18.06 (part), 18.16.)
Sec. 941.203. COMPUTATION OF RESERVE. A Lloyd's plan shall compute reserve liabilities for outstanding business and incurred losses on the same basis required for a stock insurance company engaged in the same kinds of business in this state. (V.T.I.C. Art. 18.08.)
Sec. 941.204. AUTHORIZED INVESTMENTS. (a) The minimum guaranty fund and surplus required of a Lloyd's plan under Sections 822.054, 822.202, 822.210, 822.211, and 941.201 must be:
(1) in cash; or
(2) invested as provided by:
(A) Section 822.204; or
(B) any other law governing the investment of the capital stock and minimum surplus of a capital stock insurance company engaged in the same kind of business.
(b) Funds of a Lloyd's plan other than the minimum guaranty fund and surplus described by Subsection (a) must, if invested, be invested as provided by:
(1) Article 2.10; or
(2) any other law governing the investment of the funds of a capital stock insurance company engaged in the same kind of business.
(c) A Lloyd's plan may purchase, hold, or convey real property in accordance with Section 862.002.
(d) A Lloyd's plan organized before August 10, 1943, and engaging in business under a certificate of authority issued by the former Board of Insurance Commissioners is not required to comply with this section except as to securities acquired on or after August 10, 1943, regardless of whether those securities were substituted for securities held before that date or were acquired from additional, successor, or substituted underwriters. (V.T.I.C. Arts. 18.05 (part), 18.09.)
Sec. 941.205. JOINT CONTROL OF MINIMUM ASSETS. (a) To the extent of the minimum required under this subchapter, the assets of a Lloyd's plan must be made subject to the joint control of the attorney in fact and the department, in a manner satisfactory to the department, so that the assets may not be withdrawn, diverted, or spent without the approval of the department or for a purpose not permitted under this chapter.
(b) The underwriters are entitled to the interest or income accruing from property or securities placed under joint control under Subsection (a) as the interest or income becomes payable.
(c) As an alternative to submitting assets to joint control under Subsection (a), an attorney in fact for a Lloyd's plan engaged in business before August 20, 1929, may execute a bond in the amount of $25,000 for the safekeeping of assets, to be released only on approval of the department. The corporate surety and the form of the bond must be approved by the department. (V.T.I.C. Art. 18.10.)
Sec. 941.206. IMPAIRMENT OF ASSETS. (a) If the commissioner determines that the minimum assets required of a Lloyd's plan under Section 941.201 have become impaired, the commissioner shall immediately give notice to the attorney in fact to appear and show cause why the attorney in fact's certificate of authority should not be revoked.
(b) If the underwriters or attorney in fact do not correct the impairment not later than the 30th day after the date on which notice is given under Subsection (a), the commissioner shall immediately revoke the attorney in fact's certificate of authority.
(c) If the attorney in fact or other person makes an advance to correct the impairment, a claim for the advance against the assets of the Lloyd's plan must be deferred to claims for losses under policies or contracts of insurance.
(d) If the impairment is not corrected within the period prescribed by Subsection (b), the commissioner shall take charge of the assets of the Lloyd's plan and reinsure all of the Lloyd's plan's business outstanding in this state or covering property located in this state. The commissioner may use the net assets of the Lloyd's plan to obtain the reinsurance and to provide for the payment of outstanding claims and losses. If the commissioner cannot reinsure the Lloyd's plan's business, the affairs of the Lloyd's plan must be wound up through receivership proceedings instituted by the attorney general at the request of the commissioner. (V.T.I.C. Art. 18.18 (part).)
[Sections 941.207-941.250 reserved for expansion]
SUBCHAPTER F. REGULATION OF LLOYD'S PLAN
Sec. 941.251. EXAMINATIONS. (a) The provisions of Articles 1.15 and 1.16 that relate to the examination of insurers apply to a Lloyd's plan.
(b) The department may examine the books and affairs of an attorney in fact. The attorney in fact and each deputy attorney in fact shall facilitate the examination and furnish any information reasonably required by the department. (V.T.I.C. Arts. 18.11, 18.11-1.)
Sec. 941.252. ANNUAL REPORT. (a) An attorney in fact shall annually file with the department a verified report on a form prepared by the department of:
(1) the business conducted by the attorney in fact on behalf of the Lloyd's plan during the preceding year;
(2) the condition of the affairs of the Lloyd's plan; and
(3) any other information required by the department.
(b) The report must cover all of the business conducted by the attorney in fact on behalf of the Lloyd's plan, without regard to the place where the business was conducted. (V.T.I.C. Art. 18.12.)
[Sections 941.253-941.300 reserved for expansion]
SUBCHAPTER G. FOREIGN LLOYD'S PLAN
Sec. 941.301. FOREIGN LLOYD'S PLAN; BOND OR MINIMUM NET ASSETS REQUIRED. (a) Except as provided by Subsection (b), the commissioner may not issue a certificate of authority to an attorney in fact if:
(1) the underwriters are not residents of this state; or
(2) the underwriters maintain their principal office outside of this state.
(b) The department may issue a certificate of authority to an attorney in fact in circumstances described by Subsection (a) if the underwriters, at their option:
(1) file a bond with the department that complies with Section 941.302; or
(2) maintain net assets in this state that:
(A) are subject to the joint control of the attorney in fact and the commissioner; and
(B) meet the requirements of Subchapter E regarding the minimum amount of net assets of a Lloyd's plan.
(c) A deposit of securities made under Subsection (b)(2) is considered to have been made on the same terms and conditions as a bond executed in accordance with Section 941.302.
(d) If there is recovery on a deposit or bond made under this section, the commissioner shall immediately demand that additional security be provided to increase the amount of the bonds to the minimum amount required by this section. The additional bond must be posted not later than the 30th day after the date the commissioner makes the demand. Successive recoveries may be made on a bond made under this section until the principal amount of the bond is exhausted. (V.T.I.C. Art. 18.19 (part).)
Sec. 941.302. BOND OF FOREIGN LLOYD'S PLAN. (a) A bond filed under Section 941.301 must:
(1) be executed by corporate sureties that:
(A) meet the requirements imposed by the department; and
(B) are authorized to engage in guaranty, fidelity, and surety business in this state;
(2) be in a principal amount that equals the minimum amount of net assets of a Lloyd's plan under this subchapter;
(3) be payable to the department;
(4) be conditioned for the payment of all claims arising under insurance policies or contracts:
(A) issued in this state;
(B) issued to residents of this state; or
(C) covering property located in this state; and
(5) be held by the department for the benefit of any person with a valid claim arising under an insurance policy or contract described by Subdivision (4).
(b) The bond must also provide that if a Lloyd's plan with outstanding insurance policies in favor of residents of this state or covering property located in this state becomes insolvent or ceases to engage in the business of insurance in this state, the department, after 10 days' notice to the attorney in fact for the Lloyd's plan or any receiver in charge of the Lloyd's plan's property and affairs, may contract with another insurer engaging in the business of insurance in this state for the assumption of and reinsurance by that insurer of:
(1) all of the Lloyd's plan's insurance risks outstanding in this state; and
(2) all unsatisfied lawful claims outstanding against the Lloyd's plan.
(c) If the department enters into a contract described by Subsection (b) and the attorney general approves the contract as reasonable, the assuming insurer is entitled to recover from the makers of the bond filed under Section 941.301 the amount of the premium or compensation for reinsurance that is specified in the contract.
(d) A bond filed under Section 941.301 binds any additional or substitute underwriters of the Lloyd's plan. (V.T.I.C. Art. 18.19 (part).)
[Sections 941.303-941.350 reserved for expansion]
SUBCHAPTER H. CONVERSION TO CAPITAL STOCK INSURANCE COMPANY
Sec. 941.351. CONVERSION AUTHORIZED. The underwriters may convert a Lloyd's plan to a capital stock insurance company governed by Chapter 822 by complying with this subchapter. (V.T.I.C. Art. 18.23A, Sec. (c) (part).)
Sec. 941.352. ADOPTION OF CONVERSION PLAN. The underwriters by a two-thirds vote may adopt a plan to convert the Lloyd's plan to a capital stock insurance company. (V.T.I.C. Art. 18.23A, Sec. (c) (part).)
Sec. 941.353. REQUIREMENTS OF CONVERSION PLAN. The conversion plan must provide that a capital stock insurance company will be formed in accordance with Chapter 822, except that:
(1) the company's required minimum capital and surplus must equal the required minimum guaranty fund and surplus of the Lloyd's plan;
(2) the company's assets may be in cash or in the form of an investment lawfully held by the Lloyd's plan; and
(3) an original examination under Section 822.058(b) is not required unless directed by the commissioner. (V.T.I.C. Art. 18.23A, Sec. (c) (part).)
Sec. 941.354. COMMISSIONER APPROVAL OF CONVERSION PLAN. On the commissioner's approval of the conversion plan and the formation of the capital stock insurance company, all assets, interests, obligations, and liabilities of the Lloyd's plan, including all outstanding policies and insurance obligations, are transferred to the capital stock insurance company, except as otherwise provided by this subchapter. (V.T.I.C. Art. 18.23A, Sec. (c) (part).)
Sec. 941.355. CONVERSION OF MEMBER OF HOLDING COMPANY SYSTEM. If the Lloyd's plan is a member of a holding company system identified in registration information that the Lloyd's plan filed with the department in accordance with Chapter 823, the rights and interests of the underwriters in the capital stock insurance company may be assigned at the time of conversion to any affiliated person in that holding company system. An assignment under this subsection is not:
(1) a change in control for the purposes of Section 822.212; or
(2) an acquisition of control for the purposes of Chapter 823. (V.T.I.C. Art. 18.23A, Sec. (c) (part).)
[Sections 941.356-941.700 reserved for expansion]
SUBCHAPTER O. PENALTIES
Sec. 941.701. REVOCATION OF CERTIFICATE OF AUTHORITY. The commissioner shall revoke a certificate of authority issued to an attorney in fact if the attorney in fact or an underwriter violates this chapter or any other law of this state. (V.T.I.C. Art. 18.22.)
Sec. 941.702. CRIMINAL PENALTY. (a) A person commits an offense if the person, as a principal, attorney in fact, agent, broker, or other representative, engages in the business of writing insurance on the Lloyd's plan in violation of this chapter.
(b) An offense under this section is punishable by a fine of not more than $500. (V.T.I.C. Art. 18.22-1.)
CHAPTER 942. RECIPROCAL AND INTERINSURANCE EXCHANGES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 942.001. DEFINITIONS
Sec. 942.002. SUBSCRIBER INSURANCE COVERAGE THROUGH
EXCHANGE AUTHORIZED; LIFE INSURANCE PROHIBITED
Sec. 942.003. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS
[Sections 942.004-942.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF EXCHANGE
Sec. 942.051. APPOINTMENT OF ATTORNEY IN FACT; APPROVAL
BY DEPARTMENT OF POWER OF ATTORNEY OR
OTHER AUTHORIZATION REQUIRED
Sec. 942.052. SECURITY REQUIREMENTS
Sec. 942.053. SUBSCRIBER DECLARATION
Sec. 942.054. NAME OF EXCHANGE
Sec. 942.055. OFFICE LOCATIONS
[Sections 942.056-942.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 942.101. CERTIFICATE OF AUTHORITY REQUIRED;
EFFECT ON FOREIGN CORPORATIONS
[Sections 942.102-942.150 reserved for expansion]
SUBCHAPTER D. OPERATION, POWERS, AND DUTIES OF EXCHANGE
Sec. 942.151. SUBSCRIBER LIABILITY FOR CERTAIN
CONTINGENT PREMIUMS
Sec. 942.152. SUBSCRIBER LIMITED LIABILITY BASED ON CERTAIN
MINIMUM CAPITAL AND SURPLUS
Sec. 942.153. PRIOR AUTHORITY NOT AFFECTED
Sec. 942.154. STATEMENTS RELATING TO INDEMNITY AMOUNTS
Sec. 942.155. FINANCIAL REQUIREMENTS
Sec. 942.156. ISSUANCE OF FIDELITY AND SURETY BOND INSURANCE;
DEPOSIT REQUIRED
Sec. 942.157. TRANSACTIONS BETWEEN CERTAIN INSURERS
AND AFFILIATED EXCHANGES
Sec. 942.158. ADVANCES OF MONEY BY ATTORNEY IN FACT
Sec. 942.159. VIOLATION BY ATTORNEY IN FACT OF
REQUIREMENTS REGARDING INDEMNITY CONTRACTS;
CRIMINAL PENALTY
[Sections 942.160-942.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF EXCHANGES
Sec. 942.201. ANNUAL REPORT
Sec. 942.202. EXAMINATION BY DEPARTMENT
Sec. 942.203. FEES; TAXES; FILING FEE
CHAPTER 942. RECIPROCAL AND INTERINSURANCE EXCHANGES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 942.001. DEFINITIONS. In this chapter:
(1) "Attorney in fact" means an individual, firm, or corporation who, under a power of attorney or other appropriate authorization, acts for subscribers of an exchange by issuing reciprocal or interinsurance contracts.
(2) "Exchange" means a reciprocal or interinsurance exchange and includes the office through which a reciprocal or interinsurance contract is exchanged.
(3) "Reciprocal or interinsurance contract" means an insurance policy or other contract that provides indemnity among a group of subscribers for certain losses.
(4) "Subscriber" means an individual, partnership, or corporation who, through an attorney in fact, enters into a reciprocal or interinsurance contract. (V.T.I.C. Arts. 19.01 (part), 19.02 (part), 19.03 (part), 19.10 (part); New.)
Sec. 942.002. SUBSCRIBER INSURANCE COVERAGE THROUGH EXCHANGE AUTHORIZED; LIFE INSURANCE PROHIBITED. (a) Except as provided by Subsection (c), subscribers of this state may exchange reciprocal or interinsurance contracts with other subscribers of this state or of another state or country to provide indemnity among those subscribers for a loss for which insurance coverage may be obtained under other law.
(b) A public, private, or municipal corporation organized under the laws of this state may act as a subscriber, and the right to exchange a reciprocal or interinsurance contract is:
(1) incidental to the purpose for which the corporation is organized; and
(2) in addition to the corporate rights and powers expressly conferred in the corporation's articles of incorporation.
(c) A reciprocal or interinsurance contract may not provide indemnity for a loss for which coverage may be obtained through life insurance. (V.T.I.C. Arts. 19.01 (part), 19.09.)
Sec. 942.003. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (a) Except as specifically provided by this chapter, an exchange is exempt from the insurance laws of this state unless an exchange or reciprocal is specifically designated in the law.
(b) An exchange is subject to:
(1) Section 5, Article 1.10;
(2) Articles 1.15, 1.15A, and 1.16;
(3) Subchapter A, Chapter 5;
(4) Articles 5.35, 5.37, 5.38, 5.39, and 5.40;
(5) Articles 21.21 and 21.49-8; and
(6) Sections 822.203, 822.205, 822.210, 822.212, 861.254(a)-(f), 861.255, 862.001(b), and 862.003.
(c) Subchapter M, Chapter 5, applies to the rates for motor vehicle insurance written by an exchange.
(d) The provisions of the Texas Business Corporation Act that relate to the indemnification of officers and directors apply to an exchange.
(e) Subscribers and their attorney in fact are subject to Sections 822.051, 822.057-822.060, and 822.201, except that:
(1) the subscriber declaration prescribed by Section 942.053 replaces the articles of incorporation; and
(2) the unencumbered surplus of the exchange constitutes capital structure for purposes of Section 822.060. (V.T.I.C. Art. 5.01-2, Secs. (a) (part), (b) (part); Arts. 19.03 (part), 19.12, 19.13.)
[Sections 942.004-942.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF EXCHANGE
Sec. 942.051. APPOINTMENT OF ATTORNEY IN FACT; APPROVAL BY DEPARTMENT OF POWER OF ATTORNEY OR OTHER AUTHORIZATION REQUIRED. (a) A reciprocal or interinsurance contract may be executed by an attorney in fact appointed by the subscribers of an exchange.
(b) A corporation may be organized in this state to act as attorney in fact for an exchange. The general laws regarding incorporation supplement this chapter to the extent consistent with this chapter. A corporation organized in this state to act as attorney in fact for an exchange may be organized under the Texas Business Corporation Act, notwithstanding any conflicting provision of that Act.
(c) The form of the power of attorney or other document granting authority to the attorney in fact and under which the insurance is to be exchanged is subject to approval by the department. This subsection may not be construed to permit the department to require the filing or use of uniform forms of those documents except as otherwise provided by this chapter. (V.T.I.C. Arts. 19.02 (part), 19.02A, 19.03 (part), 19.10-1 (part).)
Sec. 942.052. SECURITY REQUIREMENTS. (a) Except as provided by Subsection (d), to act as an attorney in fact, an individual, firm, or corporation must execute a good and sufficient fidelity bond that obligates the principal and surety to pay a pecuniary loss of money or property, not exceeding the amount of the bond, that is sustained by the exchange through fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, or wilful misapplication on the part of the attorney in fact, directly or through connivance with others.
(b) The bond must:
(1) be acceptable to the department;
(2) be payable to the subscribers or the department; and
(3) be in the amount of:
(A) $25,000 for an individual or firm; or
(B) $50,000 for a corporation.
(c) If the conditions of the bond are violated, the insurance supervisory authority of any state in which the attorney in fact is authorized to engage in the business of the exchange may bring an action to enforce the bond on behalf of the subscribers.
(d) Instead of a bond, an attorney in fact may deposit with the appropriate official of the exchange's state of domicile cash or securities of the kind in which a general casualty company is authorized to invest its funds. The deposit must be made in the same amount, and must be conditioned, approved, and payable in the same manner, as a bond required under this section. (V.T.I.C. Art. 19.02 (part).)
Sec. 942.053. SUBSCRIBER DECLARATION. (a) On entering into a reciprocal or interinsurance contract, the subscribers, through the attorney in fact, shall file with the department a declaration verified by the oath of the attorney in fact.
(b) The declaration must include:
(1) the name of the proposed exchange;
(2) the kinds of insurance to be provided under the reciprocal or interinsurance contract;
(3) a copy of the form of the power of attorney or other authorization of the attorney in fact under which the insurance is to be provided;
(4) the location of each office from which the reciprocal or interinsurance contracts are to be issued; and
(5) any other information prescribed by the department, including an affidavit comparable to the affidavit prescribed by Section 822.057(a)(3). (V.T.I.C. Art. 19.03 (part).)
Sec. 942.054. NAME OF EXCHANGE. (a) The name of an exchange must contain the term "reciprocal," "inter-insurance exchange," "underwriters," "association," "exchange," "underwriting," "inter-insurers," or "inter-insurors."
(b) The name selected for an exchange may not be so similar to the name of a similar organization or an insurer that, in the opinion of the department, the name is calculated to confuse or deceive. (V.T.I.C. Art. 19.03 (part).)
Sec. 942.055. OFFICE LOCATIONS. The attorney in fact shall maintain the offices of the exchange at the places designated by the subscribers in the power of attorney or other authorization. (V.T.I.C. Art. 19.02 (part).)
[Sections 942.056-942.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 942.101. CERTIFICATE OF AUTHORITY REQUIRED; EFFECT ON FOREIGN CORPORATIONS. (a) An attorney in fact must hold a certificate of authority issued by the department under Sections 801.001, 801.002, 801.051-801.055, 801.057, 801.101, and 801.102. A certificate of authority obtained in accordance with this section authorizes the attorney in fact named in the certificate to exercise all powers and perform all duties of an attorney in fact.
(b) A corporation required to obtain a certificate of authority from the department under this section is not considered to be engaging in business in this state within the meaning of any law applying to foreign corporations. (V.T.I.C. Art. 19.10 (part).)
[Sections 942.102-942.150 reserved for expansion]
SUBCHAPTER D. OPERATION, POWERS, AND DUTIES OF EXCHANGE
Sec. 942.151. SUBSCRIBER LIABILITY FOR CERTAIN CONTINGENT PREMIUMS. (a) Except as provided by Section 942.152 and Subsection (b), if a certificate of authority is issued as provided by Subchapter C, the power of attorney or other authorization executed by the subscribers must provide that, in addition to the premium or premium deposit specified in the reciprocal or interinsurance contract, the subscribers are liable for a contingent premium equal to one additional annual premium or premium deposit.
(b) If the subscribers and their attorney in fact are authorized to issue reciprocal or interinsurance contracts for cash premiums only, the power of attorney or other authorization may waive all contingent premiums. (V.T.I.C. Art. 19.03 (part).)
Sec. 942.152. SUBSCRIBER LIMITED LIABILITY BASED ON CERTAIN MINIMUM CAPITAL AND SURPLUS. If the unencumbered surplus of an exchange is at least equal to the minimum capital stock and minimum surplus required of a stock insurance company engaged in the same kinds of business, the subscribers of the exchange may provide by agreement that the premium or premium deposit specified in the reciprocal or interinsurance contract constitutes the entire liability of the subscribers through the exchange. (V.T.I.C. Art. 19.03 (part).)
Sec. 942.153. PRIOR AUTHORITY NOT AFFECTED. This chapter does not affect any authority that existed before September 6, 1955, that allowed the subscribers of an exchange and their attorney in fact to write non-assessable policies in this state, subject to any prerequisite imposed by law on that authority. (V.T.I.C. Art. 19.03 (part).)
Sec. 942.154. STATEMENTS RELATING TO INDEMNITY AMOUNTS. (a) The attorney in fact for an exchange shall file with the department a sworn statement that shows the maximum amount of indemnity on any single risk.
(b) The attorney in fact for an exchange shall, as required by the department, file with the department a sworn statement that:
(1) the attorney has examined the commercial rating of each subscriber, as established by the reference book of a commercial agency with at least 100,000 subscribers; and
(2) based on the examination or other information in the attorney's possession, it appears that no subscriber has assumed on any single risk an amount greater than 10 percent of that subscriber's net worth. (V.T.I.C. Art. 19.05.)
Sec. 942.155. FINANCIAL REQUIREMENTS. (a) An exchange shall maintain at all times an unencumbered surplus over and above all liabilities that is at least equal to the minimum capital stock and surplus required of a stock insurance company engaged in the same kinds of business.
(b) An exchange shall maintain at all times the reserves required by the laws of this state or by rules adopted by the commissioner to be maintained by stock insurance companies engaged in the same kinds of business.
(c) An exchange shall maintain the required assets as to:
(1) minimum surplus requirements, as provided by Section 822.204; and
(2) other funds, as provided by Article 2.10. (V.T.I.C. Art. 19.06 (part).)
Sec. 942.156. ISSUANCE OF FIDELITY AND SURETY BOND INSURANCE; DEPOSIT REQUIRED. (a) If a domestic exchange writes fidelity or surety bond insurance in this state, the exchange shall keep on deposit with the comptroller money, bonds, or other securities in an amount of not less than $50,000. The department shall approve for the deposit securities described by Article 2.10, and the exchange shall maintain the approved securities intact at all times.
(b) A foreign exchange that writes fidelity or surety bond insurance in this state shall file with the department evidence satisfactory to the department that the exchange has, for the protection of its subscribers, at least $100,000 in money, bonds, or other securities as described by Article 2.10 on deposit with the comptroller or other appropriate official of its state of domicile or in escrow under that official's supervision and control in a reliable bank or trust company. If those bonds or other securities are not acceptable to and approved by the department, the department may deny the attorney in fact for the exchange a certificate of authority. (V.T.I.C. Art. 19.06 (part).)
Sec. 942.157. TRANSACTIONS BETWEEN CERTAIN INSURERS AND AFFILIATED EXCHANGES. (a) In this section, "affiliate" has the meaning assigned by Section 823.003.
(b) An insurer subject to Article 5.26 may not directly or indirectly assume all or a substantial part of any risk covered by a reciprocal or interinsurance contract written by an exchange that is an affiliate of that insurer if the risk is written at a rate less than the rate that may be lawfully charged by the insurer or any affiliate of the insurer that is subject to Article 5.26. (V.T.I.C. Art. 19.12A.)
Sec. 942.158. ADVANCES OF MONEY BY ATTORNEY IN FACT. (a) The attorney in fact for an exchange may advance to the exchange any amount of money necessary to conduct the business of the exchange, including any amount necessary to enable the exchange to comply with a legal requirement.
(b) Subject to the approval of the department, the advanced amount and any agreed interest on that amount, not exceeding 10 percent a year:
(1) is payable only from the surplus of the exchange remaining after providing for all reserves, other liabilities, and required surplus; and
(2) may not otherwise be a liability or claim against the exchange or any of the exchange's assets.
(c) A commission, promotion expense, or other bonus may not be paid in connection with the advance of money to the exchange.
(d) The amount of each advance must be reported in the exchange's annual report.
(e) The department may not arbitrarily refuse approval under Subsection (b). (V.T.I.C. Art. 19.07.)
Sec. 942.159. VIOLATION BY ATTORNEY IN FACT OF REQUIREMENTS REGARDING INDEMNITY CONTRACTS; CRIMINAL PENALTY. (a) An attorney in fact commits an offense if the attorney in fact, in violation of this chapter:
(1) exchanges a reciprocal or interinsurance contract; or
(2) directly or indirectly solicits or negotiates an application for the contract.
(b) Subsection (a) does not apply to an action taken by an attorney in fact for the purpose of applying for a certificate of authority from the commissioner as provided by this chapter.
(c) An offense under this section is punishable by a fine of not less than $100 or more than $1,000. (V.T.I.C. Art. 19.10-1 (part).)
[Sections 942.160-942.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF EXCHANGES
Sec. 942.201. ANNUAL REPORT. (a) Not later than March 1 of each year, the attorney in fact for an exchange shall submit to the commissioner a report covering the previous year ending December 31.
(b) The report must:
(1) demonstrate that the financial condition of affairs at the exchange is in accordance with the financial requirements of this chapter under Section 942.155; and
(2) provide any additional information and reports as required to show:
(A) the total amount of premiums or deposits collected;
(B) the total amount of losses paid;
(C) the total amounts returned to subscribers; and
(D) the amounts retained for expenses.
(c) The attorney in fact is not required to provide in the report the name and address of any subscriber. (V.T.I.C. Art. 19.08 (part).)
Sec. 942.202. EXAMINATION BY DEPARTMENT. The business affairs and assets of an exchange, as shown at the office of the attorney in fact, are subject to examination by the department. (V.T.I.C. Art. 19.08 (part).)
Sec. 942.203. FEES; TAXES; FILING FEE. (a) To the extent appropriate, the schedule of fees established under Article 4.07 applies to an exchange and the exchange's attorney in fact.
(b) An exchange is subject to Articles 4.04, 4.10, 4.11, 5.12, 5.24, 5.49, and 5.68.
(c) The comptroller shall collect the taxes and the filing fee for the annual report. (V.T.I.C. Art. 19.11.)
[Chapters 943-960 reserved for expansion]
SUBTITLE H. OTHER ENTITIES
CHAPTER 961. NONPROFIT LEGAL SERVICES
CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 961.001. DEFINITIONS
Sec. 961.002. APPLICABILITY OF OTHER LAWS
Sec. 961.003. CORPORATION SUBJECT TO DEPARTMENT AND
COMMISSIONER SUPERVISION
Sec. 961.004. CORPORATION NOT ENGAGED IN BUSINESS OF
INSURANCE
[Sections 961.005-961.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF NONPROFIT
LEGAL SERVICES CORPORATIONS
Sec. 961.051. APPLICATION FOR CORPORATE CHARTER;
NONPROFIT STATUS REQUIRED
Sec. 961.052. MINIMUM PARTICIPATION REQUIREMENTS
[Sections 961.053-961.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 961.101. ISSUANCE OF CERTIFICATE OF AUTHORITY
Sec. 961.102. REVOCATION OF CERTIFICATE OF AUTHORITY
[Sections 961.103-961.150 reserved for expansion]
SUBCHAPTER D. BOARD OF DIRECTORS; PERSONNEL
Sec. 961.151. COMPENSATION OF DIRECTORS
Sec. 961.152. FINANCIAL OFFICER; BOND
Sec. 961.153. BOND REQUIREMENTS FOR CERTAIN PERSONS
[Sections 961.154-961.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF NONPROFIT
LEGAL SERVICES CORPORATIONS
Sec. 961.201. PLAN OF OPERATION; EXPENSE FUND BALANCE
Sec. 961.202. ANNUAL STATEMENT
Sec. 961.203. CLAIM FUND; EXPENSE FUND
Sec. 961.204. DEPOSIT REQUIREMENTS
Sec. 961.205. SOLVENCY OF FUNDS
Sec. 961.206. ADVANCE TO CORPORATION
Sec. 961.207. PARTICIPATION AGREEMENTS
Sec. 961.208. EXCLUSIVE AGENCY CONTRACT OR MANAGEMENT
CONTRACT
Sec. 961.209. REMEDIES FOR CORPORATION IN HAZARDOUS
FINANCIAL CONDITION
Sec. 961.210. RULES RELATING TO HAZARDOUS FINANCIAL
CONDITION
Sec. 961.211. BOOKS AND RECORDS
Sec. 961.212. FEES
[Sections 961.213-961.250 reserved for expansion]
SUBCHAPTER F. BENEFITS PROVIDED BY NONPROFIT LEGAL
SERVICES CORPORATIONS
Sec. 961.251. APPLICANTS; BENEFIT CERTIFICATE
Sec. 961.252. APPROVAL OF FORMS
Sec. 961.253. TYPES OF LEGAL SERVICES CONTRACTS
Sec. 961.254. INDEMNITY CONTRACTS
Sec. 961.255. LIMITATIONS ON BENEFITS
Sec. 961.256. CLAIMS
[Sections 961.257-961.300 reserved for expansion]
SUBCHAPTER G. CONTRACTS WITH ATTORNEYS
Sec. 961.301. CONTRACTS WITH ATTORNEYS
Sec. 961.302. AGREEMENT OF CONTRACTING ATTORNEYS
Sec. 961.303. LIMITATIONS ON CORPORATION'S RELATIONSHIP
WITH ATTORNEYS AND PARTICIPANTS
Sec. 961.304. CONTRACT WITH ANY ATTORNEY REQUIRED
Sec. 961.305. ATTORNEY INSURANCE REQUIRED
Sec. 961.306. PAYMENT ONLY FOR SERVICES PROVIDED
Sec. 961.307. COMPLAINT REGARDING ATTORNEY
[Sections 961.308-961.350 reserved for expansion]
SUBCHAPTER H. AGENTS
Sec. 961.351. DEFINITION
Sec. 961.352. RULES TO LICENSE AND REGULATE AGENTS
Sec. 961.353. LICENSE AND EXAMINATION FEES
Sec. 961.354. EXPIRATION
Sec. 961.355. RENEWAL; FEE
Sec. 961.356. SUSPENSION
Sec. 961.357. MULTIPLE REPRESENTATION; APPLICATION; FEES
Sec. 961.358. DISPOSITION OF FEES
[Sections 961.359-961.400 reserved for expansion]
SUBCHAPTER I. DISSOLUTION AND LIQUIDATION OF CORPORATION
Sec. 961.401. SUPERVISION BY DEPARTMENT
Sec. 961.402. VOLUNTARY DISSOLUTION
Sec. 961.403. INVOLUNTARY DISSOLUTION
Sec. 961.404. PRIORITY OF CLAIMS
CHAPTER 961. NONPROFIT LEGAL SERVICES
CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 961.001. DEFINITIONS. In this chapter:
(1) "Applicant" means a person applying for a contract for legal services to be performed through a nonprofit legal services corporation.
(2) "Benefit certificate" means:
(A) a document issued to a participant that states the benefits and other required matters under a group contract for legal services; or
(B) an individual contract for legal services issued to a participant.
(3) "Contracting attorney" means an attorney who has entered into a contract under Section 961.301.
(4) "Nonprofit legal services corporation" means a corporation created for the sole purpose of establishing, maintaining, and operating a nonprofit legal services plan under which the corporation contracts for and obtains legal services for participants through contracting attorneys in consideration of each participant's payment of a definite amount to fund the payment of the contracting attorneys' fees.
(5) "Participant" means a person entitled to performance of legal services under contract with a nonprofit legal services corporation. (V.T.I.C. Art. 23.01, Secs. (a) (part), (b)(2), (3), (4), (5); Art. 23.10 (part).)
Sec. 961.002. APPLICABILITY OF OTHER LAWS. (a) The Texas Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes) and the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) apply to a nonprofit legal services corporation to the extent not in conflict with this chapter.
(b) The following provisions of this code apply to a nonprofit legal services corporation in the same manner that they apply to an insurer or a person engaged in the business of insurance, to the extent the provisions do not conflict with this chapter:
(1) Articles 1.09-1, 1.11, 1.12, 1.13, 1.15, 1.15A, 1.16, 1.17, 1.18, 1.19, 21.21, 21.21-2, 21.28, 21.28-A, 21.47, and 21.49-8;
(2) Sections 2, 6, and 17, Article 1.10;
(3) Sections 31.002, 32.001, 32.002, 32.003, 32.021, 32.022(a), 32.023, 32.041, 33.002, 38.001, 81.004, 801.001, 801.002, 801.051-801.055, 801.057, 801.101, 801.102, 802.003, 841.251, and 841.252;
(4) Subchapter D, Chapter 36;
(5) Subchapter A, Chapter 805; and
(6) Chapter 824. (V.T.I.C. Art. 23.26.)
Sec. 961.003. CORPORATION SUBJECT TO DEPARTMENT AND COMMISSIONER SUPERVISION. Each nonprofit legal services corporation is subject to this chapter and to direct supervision by the department and the commissioner. (V.T.I.C. Arts. 23.02 (part), 23.09 (part).)
Sec. 961.004. CORPORATION NOT ENGAGED IN BUSINESS OF INSURANCE. A nonprofit legal services corporation that complies with this chapter is not engaged in the business of insurance and, except as provided by Section 961.002(b), is not subject to laws relating to insurers. (V.T.I.C. Art. 23.09 (part).)
[Sections 961.005-961.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND STRUCTURE OF NONPROFIT
LEGAL SERVICES CORPORATIONS
Sec. 961.051. APPLICATION FOR CORPORATE CHARTER; NONPROFIT STATUS REQUIRED. (a) Seven or more persons may apply to the secretary of state for a corporate charter under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) for a nonprofit legal services corporation.
(b) A nonprofit legal services corporation must be governed and operated as a nonprofit organization. (V.T.I.C. Art. 23.01, Sec. (a) (part); Art. 23.10 (part).)
Sec. 961.052. MINIMUM PARTICIPATION REQUIREMENTS. (a) After incorporation and before engaging in business other than seeking applicants and obtaining contracting attorneys, a nonprofit legal services corporation must collect in advance an application fee and at least one month's payment for services from the lesser of:
(1) 200 applicants; or
(2) the number of applicants that the department determines is necessary for a workable legal services plan.
(b) The nonprofit legal services corporation shall keep the money collected under Subsection (a) in a trust account in a bank in this state until the corporation is issued a certificate of authority under this chapter. The corporation shall refund the money in full if the corporation is not issued a certificate of authority.
(c) As a condition of continued operation, a nonprofit legal services corporation must maintain at least the lesser of:
(1) 200 participants; or
(2) the necessary number of applicants determined by the department under Subsection (a)(2). (V.T.I.C. Art. 23.02 (part).)
[Sections 961.053-961.100 reserved for expansion]
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 961.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The department shall issue a certificate of authority to a nonprofit legal services corporation to engage in business if the corporation:
(1) files a statement acceptable to the department showing that the corporation is solvent; and
(2) complies with this chapter.
(b) A certificate of authority is valid until revoked for noncompliance with law, by operation of law, or as provided by this chapter. (V.T.I.C. Art. 23.02 (part).)
Sec. 961.102. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) After a hearing, the commissioner shall revoke the certificate of authority of a nonprofit legal services corporation if:
(1) the commissioner determines the corporation is:
(A) operating fraudulently; or
(B) not complying with this chapter; or
(2) the corporation does not pay valid claims in accordance with this chapter.
(b) A hearing under Subsection (a) may be held only on the basis of written specifications and not earlier than the 21st day after the date notice of the hearing is given. (V.T.I.C. Art. 23.05 (part).)
[Sections 961.103-961.150 reserved for expansion]
SUBCHAPTER D. BOARD OF DIRECTORS; PERSONNEL
Sec. 961.151. COMPENSATION OF DIRECTORS. A director of a nonprofit legal services corporation may not receive salary or other compensation for the director's services but may receive reimbursement for reasonable and necessary expenses incurred in attending a meeting called to manage or direct the affairs of the corporation. (V.T.I.C. Art. 23.20.)
Sec. 961.152. FINANCIAL OFFICER; BOND. (a) A nonprofit legal services corporation, by resolution entered in its minutes, shall designate one or more officers to be responsible for handling the corporation's funds. The president, secretary, or general manager of the corporation must certify a copy of the resolution, and the corporation shall file the copy with the department.
(b) Except as provided by Subsection (c), the corporation shall make and file a separate or blanket surety bond covering each officer designated under Subsection (a). The bond must:
(1) be issued by a corporate surety company authorized to issue surety bonds in this state;
(2) be satisfactory to the department and payable to the department for the use and benefit of the corporation;
(3) obligate the principal and surety to pay any monetary loss to the corporation through an act of fraud, dishonesty, forgery, theft, embezzlement, or wilful misapplication by a covered officer, whether acting alone or with other persons, while employed as or exercising the powers of an officer designated under Subsection (a); and
(4) be in an amount of at least $25,000 for each officer covered.
(c) Instead of the bond required by Subsection (b), an officer designated under Subsection (a) may deposit with the department cash or securities approved by the department in the amount and subject to the conditions applicable to the bond.
(d) Successive recoveries may be made on a bond under this section until the amount of the bond is exhausted. (V.T.I.C. Art. 23.04 (part).)
Sec. 961.153. BOND REQUIREMENTS FOR CERTAIN PERSONS. (a) In addition to the bond required by Section 961.152, a nonprofit legal services corporation shall obtain a separate or blanket surety bond covering each other person who may have access to the corporation's funds. The bond must:
(1) be issued by a surety authorized by the department to do business in this state;
(2) be satisfactory to the department and payable to the department for the use and benefit of the corporation;
(3) obligate the principal and surety to pay any monetary loss to the corporation through an act of fraud, dishonesty, forgery, theft, embezzlement, or wilful misapplication by a covered person, whether acting alone or with other persons; and
(4) be in an amount determined by the department of at least $1,000 but not more than $10,000 for each person covered.
(b) Successive recoveries may be made on a bond under this section until the amount of the bond is exhausted. (V.T.I.C. Art. 23.04 (part).)
[Sections 961.154-961.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF NONPROFIT
LEGAL SERVICES CORPORATIONS
Sec. 961.201. PLAN OF OPERATION; EXPENSE FUND BALANCE. (a) Before accepting applications for participation in a legal services plan, a nonprofit legal services corporation must:
(1) have sufficient money in its expense fund described by Section 961.203 to cover initial operations; and
(2) submit to the department:
(A) a plan of operation;
(B) a rate schedule of its charges to participants; and
(C) a schedule and projections of costs of legal services to be contracted for on behalf of participants.
(b) Before the corporation may engage in business, the department must approve as adequate, fair, and reasonable:
(1) the plan of operation; and
(2) the sufficiency of the money in the expense fund.
(c) The department has continuing control over the corporation's plan of operation. A change in the plan must be filed with and approved by the department before the change takes effect.
(d) The department may not set maximum rates or premiums that may be charged under a legal services plan under this chapter. (V.T.I.C. Art. 23.14.)
Sec. 961.202. ANNUAL STATEMENT. (a) Not later than March 1 of each year, each nonprofit legal services corporation shall file with the department an annual statement that covers the corporation's operations for the preceding calendar year.
(b) The statement must be in the form prescribed by and provide the information required by the department. (V.T.I.C. Art. 23.02 (part).)
Sec. 961.203. CLAIM FUND; EXPENSE FUND. (a) A nonprofit legal services corporation shall maintain a claim fund and an expense fund.
(b) The claim fund is composed of:
(1) application fees; and
(2) at least 70 percent of the regular payments by participants, except the department may adjust this percentage on a showing that the adjustment:
(A) is in the best interest of the persons receiving legal services under the contract at the time of the adjustment; or
(B) is necessary for the corporation's development during its first year of existence.
(c) Money in the claim fund must be maintained as cash or in demand deposits or invested in:
(1) certificates of deposit, share accounts, and time deposits in a public bank or savings and loan association the deposits of which are insured by a federal government agency; or
(2) obligations of a state or the federal government.
(d) Money in the expense fund may be invested only in legal investments for the capital, surplus, and contingency funds of a stock life insurance company.
(e) Income from an investment of money in a fund accrues to that fund.
(f) Money in the claim fund may be disbursed only to pay:
(1) a valid claim;
(2) the cost of settling a contested claim;
(3) tax on the fund's income;
(4) a refund of a fee deposited in the fund;
(5) an expense directly incurred on or for preservation of an investment of the fund, including the cost of transferring a security; or
(6) an amount as provided by a contract under Section 961.207. (V.T.I.C. Art. 23.10 (part).)
Sec. 9613.204. DEPOSIT REQUIREMENTS. A nonprofit legal services corporation shall deposit money collected from applicants or participants in an account of the corporation in a public bank. The bank must be a state depository, and its deposits must be protected by the Federal Deposit Insurance Corporation. (V.T.I.C. Art. 23.17.)
Sec. 961.205. SOLVENCY OF FUNDS. As a condition of holding a certificate of authority under this chapter, a nonprofit legal services corporation shall maintain the solvency of each fund so that the admitted assets of the fund exceed the fund's liabilities, other than claim liabilities guaranteed under Section 961.302. (V.T.I.C. Art. 23.02 (part).)
Sec. 961.206. ADVANCE TO CORPORATION. Any person may advance to a nonprofit legal services corporation, on a contingent liability basis, money necessary for the purposes of the corporation's business or to comply with this chapter, except that the advance may be repaid only on prior approval of the department. The advance may be made in an amount and at a rate of interest agreed to by the person and the corporation. (V.T.I.C. Art. 23.13.)
Sec. 961.207. PARTICIPATION AGREEMENTS. (a) Subject to Subsection (b), a nonprofit legal services corporation may:
(1) contract with another nonprofit legal services corporation or an insurer authorized to engage in business in this state for joint participation through:
(A) a mutualization contract agreement; or
(B) a guaranty treaty; and
(2) cede or accept a legal services obligation from such a corporation or insurer on all or part of a legal services obligation.
(b) Each document used for a purpose described by Subsection (a) must be filed with the department and approved by the department to be in accordance with the corporation's plan of operation before the document takes effect.
(c) To carry out the purposes of this section, the commissioner may adopt rules governing an agreement with an insurer under Subsection (a). (V.T.I.C. Art. 23.19.)
Sec. 961.208. EXCLUSIVE AGENCY CONTRACT OR MANAGEMENT CONTRACT. (a) A nonprofit legal services corporation may not enter into an exclusive agency contract or management contract unless the contract has been approved by the department.
(b) Before entering into a contract governed by Subsection (a), the corporation shall file the proposed contract with the department. The department shall approve or disapprove the proposed contract not later than the 30th day after the filing date, except that the department may extend that period by a reasonable time by giving notice not later than the 30th day after the filing date.
(c) The department shall disapprove the proposed contract if the department determines that:
(1) the contract:
(A) subjects the corporation to excessive charges;
(B) lasts for an unreasonable period;
(C) does not contain fair and adequate standards of performance; or
(D) impairs the interests of the public in this state or the corporation's participants or creditors; or
(2) the persons given the power under the contract to manage the corporation are not sufficiently trustworthy, competent, experienced, and free from conflict of interest to manage the corporation, with due regard for the interest of the public and the corporation's participants and creditors. (V.T.I.C. Art. 23.25.)
Sec. 961.209. REMEDIES FOR CORPORATION IN HAZARDOUS FINANCIAL CONDITION. (a) If the commissioner determines that a nonprofit legal services corporation's financial condition is such that the continued operation of the corporation may be hazardous to the public or the corporation's participants or creditors, the commissioner, after notice and hearing, may order the corporation to take any action reasonably necessary to correct the condition, including:
(1) reducing:
(A) the amount of present and potential liability for benefits through agreements under Section 961.207;
(B) the volume of new business that the corporation accepts; or
(C) expenses through specified methods; or
(2) suspending or limiting the writing of new business for a period.
(b) If no remedy under Subsection (a) is effective and the commissioner determines that the hazardous condition is a shortage of money in the corporation's expense fund, the commissioner, after further notice and hearing, may order the corporation to deposit in the expense fund an additional amount of money sufficient to cure the hazardous condition. The commissioner may not require a corporation to maintain money in the expense fund in excess of the amount required by Section 961.205. (V.T.I.C. Art. 23.24, Sec. (a).)
Sec. 961.210. RULES RELATING TO HAZARDOUS FINANCIAL CONDITION. (a) The commissioner by rule may establish:
(1) uniform standards and criteria for early warning that the continued operation of a nonprofit legal services corporation may be hazardous to the public or the corporation's participants or creditors; and
(2) standards for evaluating the financial condition of a nonprofit legal services corporation.
(b) A standard established under this section must be consistent with the purposes of this section and Section 961.209. (V.T.I.C. Art. 23.24, Sec. (b).)
Sec. 961.211. BOOKS AND RECORDS. (a) A nonprofit legal services corporation shall keep complete books and records of all money collected and disbursed.
(b) The department may examine books and records under this section at the corporation's expense. (V.T.I.C. Art. 23.21.)
Sec. 961.212. FEES. (a) The commissioner shall charge each of the following fees in an amount prescribed by the commissioner not to exceed:
(1) $400 for filing an annual operating statement;
(2) $3,000 for filing an application for a certificate of authority, including the fee for issuance of the certificate of authority; and
(3) $100 for issuance of each additional certificate of authority and amendment of a certificate of authority.
(b) The comptroller shall collect the annual operating statement filing fee. (V.T.I.C. Art. 23.08.)
[Sections 961.213-961.250 reserved for expansion]
SUBCHAPTER F. BENEFITS PROVIDED BY NONPROFIT LEGAL
SERVICES CORPORATIONS
Sec. 961.251. APPLICANTS; BENEFIT CERTIFICATE. (a) A nonprofit legal services corporation may accept applicants and shall issue a benefit certificate to each applicant that becomes a participant under a legal services contract. Before issuance of the certificate, the applicant must pay the application fee, which does not apply as part of the cost of receiving benefits under the certificate.
(b) On issuance of the benefit certificate, the participant is entitled to the legal services stated in the certificate for the period provided by the certificate. (V.T.I.C. Arts. 23.09 (part), 23.10 (part), 23.16 (part).)
Sec. 961.252. APPROVAL OF FORMS. A certificate, application form, or contract between a nonprofit legal services corporation and a participant's employer or group representative must be in a form approved by the department before issuance. The department may adopt rules relating to those forms to provide that they properly describe applicable benefits and are not unjust, misleading, or deceptive. (V.T.I.C. Art. 23.16 (part).)
Sec. 961.253. TYPES OF LEGAL SERVICES CONTRACTS. A nonprofit legal services corporation may issue legal services contracts on an individual, group, or franchise basis. (V.T.I.C. Art. 23.09 (part).)
Sec. 961.254. INDEMNITY CONTRACTS. (a) A nonprofit legal services corporation may issue a contract for legal services, as provided by rules adopted by the commissioner, providing for indemnity for costs of services of an attorney who is not a contracting attorney if the department is satisfied that the corporation's plan of operation, experience, and financial standing, including a proper amount of unencumbered surplus, are adequate to ensure performance of the contract.
(b) A contract under Subsection (a) may be issued without the guarantee provided by Section 961.302(1). (V.T.I.C. Art. 23.15 (part).)
Sec. 961.255. LIMITATIONS ON BENEFITS. A contract for legal services or a benefit certificate issued by a nonprofit legal services corporation may limit:
(1) the types and extent of benefits; and
(2) the circumstances under which legal services are provided. (V.T.I.C. Art. 23.11 (part).)
Sec. 961.256. CLAIMS. (a) A nonprofit legal services corporation shall pay a lawful claim for payment under a benefit certificate not later than the 120th day after the date of receipt of due proof of claim.
(b) Written notice of a claim given to the corporation is considered due proof of claim under this section if the corporation does not provide to the claimant before the 16th day after the date notice is received the forms usually provided by the corporation for filing a claim. (V.T.I.C. Art. 23.05 (part).)
[Sections 961.257-961.300 reserved for expansion]
SUBCHAPTER G. CONTRACTS WITH ATTORNEYS
Sec. 961.301. CONTRACTS WITH ATTORNEYS. (a) A nonprofit legal services corporation may contract with attorneys as provided by this chapter to ensure to each participant legal services performed by the attorneys under the contract for legal services between the corporation and the participant. A contracting attorney must be licensed to practice law in the jurisdiction in which legal services are to be provided.
(b) Before issuing a contract for legal services and while the corporation continues to issue those contracts, the corporation must maintain the number of contracting attorneys that the department determines is necessary to service the participant contracts contemplated by the corporation's plan of operation. (V.T.I.C. Art. 23.01, Sec. (b)(1); Art. 23.03; Art. 23.11 (part).)
Sec. 961.302. AGREEMENT OF CONTRACTING ATTORNEYS. The contracting attorneys shall:
(1) guarantee to the participants the services stated under the participants' benefit certificates, except as provided by Section 961.254; and
(2) agree to perform without cost to the participants, other than the money of the nonprofit legal services corporation held for the participants' benefit under the corporation's plan of operation, services described by the benefit certificates. (V.T.I.C. Art. 23.15 (part).)
Sec. 961.303. LIMITATIONS ON CORPORATION'S RELATIONSHIP WITH ATTORNEYS AND PARTICIPANTS. (a) A nonprofit legal services corporation may not:
(1) contract to practice law; or
(2) control or attempt to control the relations existing between a participant and the participant's attorney.
(b) The corporation may act only as an agent on behalf of its participants for legal services and, except as provided by Section 961.254, those services may be provided only by and through contracting attorneys. A contracting attorney must be an independent contractor maintaining a direct lawyer and client relationship with a participant and may not be an employee of the corporation. (V.T.I.C. Art. 23.12 (part).)
Sec. 961.304. CONTRACT WITH ANY ATTORNEY REQUIRED. A nonprofit legal services corporation must agree to contract under Section 961.301 with any attorney licensed to practice law in this state. (V.T.I.C. Art. 23.12 (part).)
Sec. 961.305. ATTORNEY INSURANCE REQUIRED. (a) Each contracting attorney shall maintain professional liability and errors and omissions insurance as required by the nonprofit legal services corporation with which the attorney contracts.
(b) The commissioner by rule may establish minimum amounts for coverage under Subsection (a). (V.T.I.C. Art. 23.12 (part).)
Sec. 961.306. PAYMENT ONLY FOR SERVICES PROVIDED. A nonprofit legal services corporation may not pay any of the claim funds collected from participants to an attorney except for legal services that the attorney provided to participants. (V.T.I.C. Art. 23.18.)
Sec. 961.307. COMPLAINT REGARDING ATTORNEY. If the department receives a complaint concerning the performance of an attorney connected with a nonprofit legal services corporation, the department shall refer the complaint to:
(1) the supreme court of this state or a person that the supreme court designates to receive attorney grievances from the public, if the attorney is licensed by this state; or
(2) the appropriate licensing agency of another jurisdiction where the attorney is licensed, if the attorney is not licensed by this state. (V.T.I.C. Art. 23.22.)
[Sections 961.308-961.350 reserved for expansion]
SUBCHAPTER H. AGENTS
Sec. 961.351. DEFINITION. In this subchapter, "agent" means an individual who solicits contracts for legal services or enrolls applicants. (V.T.I.C. Art. 23.23, Sec. (a) (part).)
Sec. 961.352. RULES TO LICENSE AND REGULATE AGENTS. The commissioner after notice and hearing may adopt reasonable rules necessary to license and regulate agents. (V.T.I.C. Art. 23.23, Sec. (a) (part).)
Sec. 961.353. LICENSE AND EXAMINATION FEES. (a) Before issuing a license under this subchapter, the commissioner must receive from the person applying for the license:
(1) a nonrefundable license fee in an amount not to exceed $50; and
(2) unless the department accepts under Article 21.01-1 a qualifying examination administered by a testing service, an examination fee in an amount not to exceed $20.
(b) The commissioner shall set the amount of the fees.
(c) A new examination fee must be paid for each examination.
(d) An examination fee may not be refunded unless the person:
(1) not later than 24 hours before the time the examination begins, notifies the commissioner that an emergency situation exists;
(2) receives the commissioner's permission to not take the examination; and
(3) does not appear to take the examination. (V.T.I.C. Art. 23.23, Sec. (b).)
Sec. 961.354. EXPIRATION. Unless the commissioner adopts a staggered renewal system under Article 21.01-2, a license issued to an agent expires on the earlier of:
(1) the second anniversary of the date the license is issued; or
(2) the date the agent's authority to act for a nonprofit legal services corporation is terminated. (V.T.I.C. Art. 23.23, Sec. (c).)
Sec. 961.355. RENEWAL; FEE. (a) A person may renew a license issued under this subchapter by filing with the department on or before the date the license expires a renewal application and paying the nonrefundable renewal fee.
(b) The department shall set the renewal fee in an amount not to exceed $50.
(c) A person may not renew a license that has expired or been suspended or revoked. (V.T.I.C. Art. 23.23, Sec. (d).)
Sec. 961.356. SUSPENSION. The department shall suspend a license issued to an agent if the agent is not operating under an appointment from a nonprofit legal services corporation. The department shall terminate the suspension when the department receives acceptable notice that an appointment exists. (V.T.I.C. Art. 23.23, Sec. (e) (part).)
Sec. 961.357. MULTIPLE REPRESENTATION; APPLICATION; FEES. (a) An agent licensed under this subchapter may apply to act as an agent for more than one nonprofit legal services corporation.
(b) The agent and the corporation must give notice to the department of any additional appointment authorizing the agent to act as an agent for that corporation. The notice must be accompanied by:
(1) a certificate from the corporation that the corporation desires to appoint the applicant as its agent;
(2) a nonrefundable fee; and
(3) any other information that the department requires.
(c) The commissioner shall set the fee in an amount not to exceed $16.
(d) The agent may act for the corporation if:
(1) the department approves the application for an additional appointment; or
(2) notice of disapproval is not received before the eighth day after the date the department receives the application and fee. (V.T.I.C. Art. 23.23, Sec. (e) (part).)
Sec. 961.358. DISPOSITION OF FEES. (a) The department shall deposit a fee collected under this subchapter to the credit of the Texas Department of Insurance operating account, to be used to administer this chapter and other state law governing agents of nonprofit legal services corporations. The fees may be used to pay salaries, travel expenses, office expenses, and other incidental expenses incurred in administering this chapter.
(b) Article 1.31A applies to a fee collected under this subchapter. (V.T.I.C. Art. 23.23, Sec. (f).)
[Sections 961.359-961.400 reserved for expansion]
SUBCHAPTER I. DISSOLUTION AND LIQUIDATION OF CORPORATION
Sec. 961.401. SUPERVISION BY DEPARTMENT. The department shall supervise any dissolution or liquidation of a nonprofit legal services corporation. (V.T.I.C. Art. 23.06 (part).)
Sec. 961.402. VOLUNTARY DISSOLUTION. (a) The board of directors of a nonprofit legal services corporation may vote to dissolve the corporation at any time, but the corporation may not be dissolved without the department's approval.
(b) In a dissolution under this section, the officers of the corporation shall settle all outstanding obligations to participants and otherwise dispose of the corporation's affairs. After the officers have completed the corporation's liquidation and a final settlement has been filed with and approved by the department, the corporation shall be dissolved as provided by the provisions relating to voluntary dissolution under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes). (V.T.I.C. Art. 23.07 (part).)
Sec. 961.403. INVOLUNTARY DISSOLUTION. If the commissioner after notice and hearing determines that a nonprofit legal services corporation is insolvent or has violated this chapter, the corporation's affairs shall be disposed of:
(1) by a liquidator appointed by and under the supervision of the commissioner; or
(2) in an appropriate case, under the direction of a court in Travis County. (V.T.I.C. Art. 23.07 (part).)
Sec. 961.404. PRIORITY OF CLAIMS. In a dissolution of a nonprofit legal services corporation, participants' claims have priority over all other claims except costs of liquidation. (V.T.I.C. Art. 23.06 (part).)
[Chapters 962-980 reserved for expansion]
SUBTITLE I. COMPANIES THAT ARE NOT
ORGANIZED IN TEXAS
CHAPTER 981. SURPLUS LINES INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 981.001. PURPOSE
Sec. 981.002. DEFINITIONS
Sec. 981.003. APPLICABILITY OF CHAPTER
Sec. 981.004. SURPLUS LINES INSURANCE AUTHORIZED
Sec. 981.005. VALIDITY OF CONTRACTS
Sec. 981.006. SANCTIONS
Sec. 981.007. LIABILITY OF SURPLUS LINES INSURER FOR LOSSES
AND UNEARNED PREMIUMS
Sec. 981.008. SURPLUS LINES INSURANCE PREMIUM TAX
Sec. 981.009. RULES
[Sections 981.010-981.050 reserved for expansion]
SUBCHAPTER B. ELIGIBILITY REQUIREMENTS FOR SURPLUS
LINES INSURERS
Sec. 981.051. AUTHORIZATION REQUIRED
Sec. 981.052. GOOD REPUTATION AND PROMPT SERVICE REQUIRED
Sec. 981.053. COMPETENCE, TRUSTWORTHINESS, AND EXPERIENCE
REQUIRED
Sec. 981.054. CERTAIN PRECONDITIONS NOT ALLOWED
Sec. 981.055. FAILURE TO PAY PENALTY
Sec. 981.056. FAILURE TO PAY PREMIUM TAXES
Sec. 981.057. MINIMUM CAPITAL AND SURPLUS REQUIREMENTS
Sec. 981.058. ALIEN INSURERS: TRUST FUND REQUIREMENT
Sec. 981.059. ALTERNATIVE FOR CERTAIN INSURER GROUPS
Sec. 981.060. EXEMPTION DUE TO MINIMUM PREMIUM LEVEL
Sec. 981.061. EXEMPTION DUE TO CERTAIN INSURER
CHARACTERISTICS
Sec. 981.062. EXEMPTION DUE TO SIZE OF INSURER AND OTHER
FACTORS
Sec. 981.063. COMMISSIONER OR DEPARTMENT NOT RESPONSIBLE FOR
DETERMINING UNAUTHORIZED INSURER'S FINANCIAL
CONDITION OR CLAIMS PRACTICES
Sec. 981.064. COMMISSIONER MAY ORDER REVOCATION OF CONTRACTS
Sec. 981.065. APPLICABILITY TO CONTRACT EXTENSION
[Sections 981.066-981.100 reserved for expansion]
SUBCHAPTER C. REQUIREMENTS AND PROCEDURES FOR ISSUANCE OF
SURPLUS LINES DOCUMENTS
Sec. 981.101. REQUIREMENTS FOR SURPLUS LINES DOCUMENTS
Sec. 981.102. LIMIT ON USE OF SURPLUS LINES POLICY OR
CONTRACT FORMS
Sec. 981.103. DELIVERY TO INSURED OF SURPLUS LINES
DOCUMENTS
Sec. 981.104. DELIVERY TO INSURED OF REVISED SURPLUS
LINES DOCUMENTS
Sec. 981.105. FILING WITH STAMPING OFFICE
[Sections 981.106-981.150 reserved for expansion]
SUBCHAPTER D. SURPLUS LINES STAMPING OFFICE
Sec. 981.151. STATUS AS NONPROFIT ASSOCIATION
Sec. 981.152. BOARD OF DIRECTORS
Sec. 981.153. PLAN OF OPERATION
Sec. 981.154. POWERS AND DUTIES
Sec. 981.155. SUPERVISION BY COMMISSIONER
Sec. 981.156. EXAMINATION BY COMMISSIONER
Sec. 981.157. IMMUNITY FROM LIABILITY
Sec. 981.158. EXEMPTION FROM PUBLIC INFORMATION LAW
Sec. 981.159. EXEMPTION FROM LIBRARY AND ARCHIVES LAW
Sec. 981.160. NO ENFORCEMENT AUTHORITY
[Sections 981.161-981.200 reserved for expansion]
SUBCHAPTER E. SURPLUS LINES AGENTS
Sec. 981.201. DEFINITION
Sec. 981.202. SURPLUS LINES LICENSE REQUIRED
Sec. 981.203. QUALIFICATIONS FOR SURPLUS LINES LICENSE;
LICENSE TERM
Sec. 981.204. CLASSIFICATION OF SURPLUS LINES AGENTS
Sec. 981.205. EXAMINATION
Sec. 981.206. FINANCIAL RESPONSIBILITY
Sec. 981.207. DUPLICATE SURPLUS LINES LICENSE
Sec. 981.208. RENEWAL OF SURPLUS LINES LICENSE
Sec. 981.209. FEES
Sec. 981.210. PLACEMENT OF COVERAGE
Sec. 981.211. FINANCIAL CONDITION OF SURPLUS LINES
INSURERS
Sec. 981.212. ACCEPTING SURPLUS LINES INSURANCE FROM OTHER
AGENTS
Sec. 981.213. FILING CONTRACT WITH STAMPING OFFICE
Sec. 981.214. COMPLIANCE WITH STAMPING OFFICE PLAN OF
OPERATION
Sec. 981.215. SURPLUS LINES AGENT RECORDS
Sec. 981.216. ANNUAL REPORT
Sec. 981.217. NOTICE TO DEPARTMENT REQUIRED
Sec. 981.218. DEPARTMENT MONITORING OF SURPLUS LINES AGENTS
Sec. 981.219. ADVERTISING
Sec. 981.220. MANAGING GENERAL AGENTS; LIMITED AUTHORITY OF
CERTAIN AGENTS
CHAPTER 981. SURPLUS LINES INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 981.001. PURPOSE. (a) An insurance transaction that is entered into by a resident of this state with an eligible surplus lines insurer through a surplus lines agent because of difficulty in obtaining coverage from an authorized insurer is a matter of public interest.
(b) The transaction of surplus lines insurance is a subject of concern and it is necessary to provide for the regulation, taxation, supervision, and control of these transactions and the practices and matters related to these transactions by:
(1) requiring appropriate standards and reports concerning the placement of surplus lines insurance;
(2) imposing requirements necessary to make regulation and control of surplus lines insurance reasonably complete and effective;
(3) providing orderly access to eligible surplus lines insurers;
(4) ensuring the maintenance of fair and honest markets;
(5) protecting the revenues of this state; and
(6) protecting authorized insurers, which under the laws of this state must meet strict standards relating to the regulation and taxation of the business of insurance, from unfair competition by unauthorized insurers.
(c) To regulate and tax surplus lines insurance placed in accordance with this chapter within the meaning and intent of 15 U.S.C. Section 1011, this chapter provides an orderly method for the residents of this state to effect insurance with eligible surplus lines insurers through qualified, licensed, and supervised surplus lines agents in this state, if coverage is not available from authorized and regulated insurers engaged in business in this state, under reasonable and practical safeguards. (V.T.I.C. Art. 1.14-2, Sec. 1.)
Sec. 981.002. DEFINITIONS. In this chapter:
(1) "Eligible surplus lines insurer" means an insurer that is not an authorized insurer, but that is eligible under Subchapter B, in which surplus lines insurance is placed or may be placed under this chapter.
(2) "Stamping office" means the Surplus Lines Stamping Office of Texas.
(3) "Surplus lines agent" means an agent licensed under Subchapter E to procure an insurance contract from a surplus lines insurer.
(4) "Surplus lines insurance" means insurance coverage:
(A) for a subject that is resident, located, or to be performed in this state; and
(B) that may be placed, in accordance with this chapter, with an eligible surplus lines insurer. (V.T.I.C. Art. 1.14-2, Secs. 2(a)(1) (part), (b), 3(a) (part), 6A(a) (part); New.)
Sec. 981.003. APPLICABILITY OF CHAPTER. This chapter applies to insurance:
(1) of a subject that is resident, located, or to be performed in this state; and
(2) that is obtained, continued, or renewed through:
(A) negotiations or an application wholly or partly occurring or made within or from within this state; or
(B) premiums wholly or partly remitted directly or indirectly from within this state. (V.T.I.C. Art. 1.14-2, Sec. 3(b).)
Sec. 981.004. SURPLUS LINES INSURANCE AUTHORIZED. (a) An eligible surplus lines insurer may provide surplus lines insurance only if:
(1) the full amount of required insurance cannot be obtained, after a diligent effort, from an insurer authorized to write and actually writing that kind and class of insurance in this state;
(2) the insurance is placed through a surplus lines agent; and
(3) the insurer meets the eligibility requirements of Subchapter B as of the inception date and annual anniversary date of each insurance contract, cover note, or other confirmation of insurance.
(b) An eligible surplus lines insurer may provide surplus lines insurance only in the amount that exceeds the amount of insurance obtainable from authorized insurers. (V.T.I.C. Art. 1.14-2, Secs. 3(a) (part), 5(a), 7(c).)
Sec. 981.005. VALIDITY OF CONTRACTS. (a) Unless a material and intentional violation of this chapter or Section 12, Article 1.14-2, exists, an insurance contract obtained from an eligible surplus lines insurer is:
(1) valid and enforceable as to all parties; and
(2) recognized in the same manner as a comparable contract issued by an authorized insurer.
(b) A material and intentional violation of this chapter or Section 12, Article 1.14-2, does not preclude the insured from enforcing the insured's rights under the contract. (V.T.I.C. Art. 1.14-2, Sec. 9.)
Sec. 981.006. SANCTIONS. Chapter 82 applies to a surplus lines agent or an eligible surplus lines insurer that violates:
(1) this chapter;
(2) Section 12, Article 1.14-2; or
(3) a rule or order adopted under Subchapter B or Section 981.005. (V.T.I.C. Art. 1.14-2, Secs. 17, 17A.)
Sec. 981.007. LIABILITY OF SURPLUS LINES INSURER FOR LOSSES AND UNEARNED PREMIUMS. (a) This section applies if:
(1) an eligible surplus lines insurer has assumed a risk under this chapter; and
(2) the surplus lines agent who placed the insurance has received the premium for that risk.
(b) If a coverage question between the eligible surplus lines insurer and the insured arises regarding the assumed risk, the insurer is considered to have received the premium due for that coverage.
(c) The eligible surplus lines insurer is liable to the insured for any:
(1) loss covered by the insurance; and
(2) unearned premium payable to the insured on cancellation of the insurance.
(d) This section applies without regard to whether the surplus lines agent is indebted to the insurer regarding the insurance or for any other cause.
(e) An eligible surplus lines insurer that assumes a risk under this chapter subjects itself to this section. (V.T.I.C. Art. 1.14-2, Sec. 10.)
Sec. 981.008. SURPLUS LINES INSURANCE PREMIUM TAX. The premiums charged for surplus lines insurance are subject to the premium tax imposed under Section 12, Article 1.14-2. (New.)
Sec. 981.009. RULES. The commissioner may adopt rules to enforce this chapter. (V.T.I.C. Art. 1.14-2, Sec. 3A (part).)
[Sections 981.010-981.050 reserved for expansion]
SUBCHAPTER B. ELIGIBILITY REQUIREMENTS FOR SURPLUS
LINES INSURERS
Sec. 981.051. AUTHORIZATION REQUIRED. (a) Before an insurer may issue surplus lines insurance, the insurer must hold an authorization to engage in the business of insurance from its domiciliary state or country.
(b) The authorization from the domiciliary state or country must be for the same kind or class of insurance to be written in this state as surplus lines insurance.
(c) The surplus lines insurer must provide to the commissioner satisfactory evidence that the insurer holds the authorization. (V.T.I.C. Art. 1.14-2, Secs. 8(g), (m).)
Sec. 981.052. GOOD REPUTATION AND PROMPT SERVICE REQUIRED. To issue surplus lines insurance, an insurer must have a good reputation and provide reasonably prompt service to its policyholders in the payment of just losses and claims. (V.T.I.C. Art. 1.14-2, Sec. 8(h).)
Sec. 981.053. COMPETENCE, TRUSTWORTHINESS, AND EXPERIENCE REQUIRED. An insurer may not issue surplus lines insurance if:
(1) the insurer's management is:
(A) incompetent or untrustworthy; or
(B) so lacking in insurance company managerial experience as to make the insurer's proposed operation hazardous to the insurance-buying public; or
(2) the commissioner has good reason to believe that the insurer is affiliated directly or indirectly, through ownership, control, reinsurance transactions, or other insurance or business relations, with a person whose business operations are or have been detrimental to policyholders, shareholders, investors, creditors, or the public. (V.T.I.C. Art. 1.14-2, Sec. 8(i).)
Sec. 981.054. CERTAIN PRECONDITIONS NOT ALLOWED. An eligible surplus lines insurer may not require as a condition precedent to writing new or renewal surplus lines insurance that the insured or prospective insured place with the insurer other insurance that is not obtainable as surplus lines insurance. (V.T.I.C. Art. 1.14-2, Sec. 8(k).)
Sec. 981.055. FAILURE TO PAY PENALTY. An insurer may not issue surplus lines insurance if the insurer or its agents have failed to pay a statutory penalty imposed on the insurer or its agents. (V.T.I.C. Art. 1.14-2, Sec. 8(j) (part).)
Sec. 981.056. FAILURE TO PAY PREMIUM TAXES. An insurer may not issue surplus lines insurance if the insurer is obligated to pay a premium tax in this state and has not paid the tax. (V.T.I.C. Art. 1.14-2, Sec. 8(j) (part).)
Sec. 981.057. MINIMUM CAPITAL AND SURPLUS REQUIREMENTS. (a) Except as provided by Subsection (b), an eligible surplus lines insurer must maintain capital and surplus in an amount of at least $15 million.
(b) If an eligible surplus lines insurer is an insurance exchange created by the laws of another state:
(1) the syndicates of the exchange must maintain under terms acceptable to the commissioner capital and surplus, or the equivalent under the laws of the exchange's domiciliary jurisdiction, in an amount of at least $75 million in the aggregate;
(2) the exchange must maintain under terms acceptable to the commissioner at least 50 percent of the policyholder surplus of each individual syndicate in a custodial account accessible to the exchange or the exchange's domiciliary commissioner in the event of insolvency or impairment of the individual syndicate; and
(3) an individual syndicate, to be eligible to accept surplus lines insurance placements from this state as an exchange member, must maintain under terms acceptable to the commissioner capital and surplus, or the equivalent under the laws of the exchange's domiciliary jurisdiction, in the amount of at least:
(A) $5 million, if the syndicate is a member of an insurance exchange that maintains at least $15 million for the protection of all exchange policyholders; or
(B) the greater of:
(i) the minimum capital and surplus of the exchange's domiciliary jurisdiction; or
(ii) $15 million. (V.T.I.C. Art. 1.14-2, Sec. 8(b) (part).)
Sec. 981.058. ALIEN INSURERS: TRUST FUND REQUIREMENT. In addition to meeting the minimum capital and surplus requirements prescribed by Section 981.057, an alien surplus lines insurer must provide evidence that:
(1) the insurer maintains in the United States an irrevocable trust fund in a Federal Reserve System member bank in an amount of at least $5.4 million for the protection of all its policyholders in the United States; and
(2) the trust fund consists of:
(A) cash;
(B) securities;
(C) letters of credit; or
(D) investments of substantially the same character and quality as those that are eligible investments for the capital and statutory reserves of an insurer authorized to write similar kinds and classes of insurance in this state. (V.T.I.C. Art. 1.14-2, Sec. 8(d).)
Sec. 981.059. ALTERNATIVE FOR CERTAIN INSURER GROUPS. (a) This section applies only to an insurer group that includes unincorporated individual insurers.
(b) Instead of the minimum capital and surplus requirements prescribed by Section 981.057, an insurer group may maintain a trust fund in an amount of at least $50 million as security to the full amount of the trust fund for all policyholders and creditors in the United States of each group member.
(c) Except as provided by this section, the trust fund must comply with the terms specified by Section 981.058 for the trust fund required by that section. (V.T.I.C. Art. 1.14-2, Sec. 8(f).)
Sec. 981.060. EXEMPTION DUE TO MINIMUM PREMIUM LEVEL. (a) The commissioner by rule shall exempt an eligible surplus lines insurer from the minimum capital and surplus requirements prescribed by Section 981.057 if the insurer writes less than a minimum level of insurance premium in this state.
(b) The rules must specify the minimum level of insurance premium. (V.T.I.C. Art. 1.14-2, Sec. 8(c) (part).)
Sec. 981.061. EXEMPTION DUE TO CERTAIN INSURER CHARACTERISTICS. The commissioner may exempt an eligible surplus lines insurer from the minimum capital and surplus requirements prescribed by Section 981.057 if the commissioner determines, after a hearing, that the exemption is warranted based on factors such as:
(1) the insurer's quality of management;
(2) the capital and surplus of a parent company;
(3) the insurer's underwriting profit and investment income trends;
(4) the insurer's reinsurance contracts;
(5) the insurer's record and reputation in the industry; and
(6) any other information the commissioner requires to make a determination. (V.T.I.C. Art. 1.14-2, Sec. 8(c) (part).)
Sec. 981.062. EXEMPTION DUE TO SIZE OF INSURER AND OTHER FACTORS. (a) The commissioner may exempt an eligible surplus lines insurer from the minimum capital and surplus requirements prescribed by Section 981.057 if the commissioner determines, after a hearing, that the insurer complies with the following requirements:
(1) the insurer has capital and surplus in an amount of at least $6 million;
(2) the amount of net risk retained by the insurer after ceding to a reinsurer is reasonable and does not exceed 10 percent of the insurer's capital and surplus;
(3) the annual ratio of net written premiums to surplus of the insurer does not exceed 2.5 to 1;
(4) the insurer's reinsurance company is rated at least "B+" by the A. M. Best Company;
(5) the ownership interest in the insurer of an agent who places insurance with the insurer does not exceed 10 percent;
(6) the insurer's managing head, officers, or directors have sufficient insurance ability, standing, and good record to make probable the continued success of the insurer;
(7) the composition, quality, duration, and liquidity of the insurer's investment portfolio are prudent;
(8) the insurer is audited annually by an independent certified public accountant who is in good standing with the American Institute of Certified Public Accountants and is licensed to practice by the Texas State Board of Public Accountancy, and a copy of the audit is filed with the commissioner;
(9) the number and type of complaints against the insurer are not excessive in relation to the number of insurance policies written by the insurer; and
(10) the insurer is acting in good faith in requesting an exemption.
(b) The commissioner may waive any of the requirements applicable to an insurer under Subsection (a) if, in the commissioner's judgment, a waiver would not adversely affect the insurer's policyholders.
(c) The commissioner may annually renew the exemption if the eligible surplus lines insurer certifies each year that the insurer continues to comply with the requirements under Subsection (a).
(d) The commissioner may hold a hearing at any time to determine if the continued exemption is warranted. (V.T.I.C. Art. 1.14-2, Sec. 8(e).)
Sec. 981.063. COMMISSIONER OR DEPARTMENT NOT RESPONSIBLE FOR DETERMINING UNAUTHORIZED INSURER'S FINANCIAL CONDITION OR CLAIMS PRACTICES. This subchapter does not impose on the commissioner or department a responsibility to determine the actual financial condition or claims practices of an unauthorized insurer as described by Chapter 101. (V.T.I.C. Art. 1.14-2, Sec. 8(l).)
Sec. 981.064. COMMISSIONER MAY ORDER REVOCATION OF CONTRACTS. The commissioner may order the revocation of an insurance contract issued by an eligible surplus lines insurer that does not meet the eligibility requirements of this subchapter. (V.T.I.C. Art. 1.14-2, Sec. 8(j) (part).)
Sec. 981.065. APPLICABILITY TO CONTRACT EXTENSION. This subchapter and Sections 981.101(b), 981.210, and 981.211 apply to an extension of an insurance contract beyond its original expiration date. (V.T.I.C. Art. 1.14-2, Sec. 7(d).)
[Sections 981.066-981.100 reserved for expansion]
SUBCHAPTER C. REQUIREMENTS AND PROCEDURES FOR ISSUANCE OF
SURPLUS LINES DOCUMENTS
Sec. 981.101. REQUIREMENTS FOR SURPLUS LINES DOCUMENTS. (a) In this section, "surplus lines document" means each new or renewal insurance contract, certificate, cover note, or other confirmation of insurance obtained and delivered as surplus line coverage under this chapter.
(b) A surplus lines document must state, in 11-point type, the following:
This insurance contract is with an insurer not licensed to transact insurance in this state and is issued and delivered as surplus line coverage under the Texas insurance statutes. The Texas Department of Insurance does not audit the finances or review the solvency of the surplus lines insurer providing this coverage, and the insurer is not a member of the property and casualty insurance guaranty association created under Article 21.28-C, Insurance Code. Section 12, Article 1.14-2, Insurance Code, requires payment of a ______ (insert appropriate tax rate) percent tax on gross premium.
(c) A surplus lines document must show:
(1) the description and location of the subject of the insurance;
(2) the coverage, conditions, and term of the insurance;
(3) the premium and rate charged, and premium taxes to be collected from the insured;
(4) the name and address of:
(A) the insured;
(B) the insurer; and
(C) the insurance agent who obtained the surplus line coverage; and
(5) if the direct risk is assumed by more than one insurer:
(A) the name and address of each insurer; and
(B) the proportion of the entire direct risk assumed by each insurer. (V.T.I.C. Art. 1.14-2, Secs. 7(a), (b).)
Sec. 981.102. LIMIT ON USE OF SURPLUS LINES POLICY OR CONTRACT FORMS. A surplus lines insurance policy or contract form may not be used unless use of the form is:
(1) reasonably necessary for the principal purposes of the insurance coverage; or
(2) not contrary to the purposes of this chapter regarding the reasonable protection of authorized insurers from unwarranted competition by unauthorized insurers. (V.T.I.C. Art. 1.14-2, Sec. 5(b).)
Sec. 981.103. DELIVERY TO INSURED OF SURPLUS LINES DOCUMENTS. (a) On placing new or renewal surplus lines coverage, a surplus lines agent shall promptly issue and deliver to the insured or to the insured's agent the following evidence of insurance:
(1) the policy issued by the insurer; or
(2) if the policy is not available, a certificate, cover note, or other confirmation of insurance.
(b) If the policy is not available at the time of placement of the insurance, the surplus lines agent shall, on the insured's request and as soon as reasonably possible:
(1) obtain the policy from the insurer; and
(2) deliver the policy to the insured to replace the certificate, cover note, or other confirmation of insurance previously issued.
(c) A surplus lines agent may not deliver the evidence of insurance described by Subsection (a), or purport to insure or represent that insurance will be or has been granted by an eligible surplus lines insurer, unless the agent:
(1) has prior written authority from the insurer for the insurance; or
(2) has received information from the insurer in the regular course of business that:
(A) the insurance has been granted; or
(B) an insurance policy providing the insurance actually has been issued by the insurer and delivered to the insured. (V.T.I.C. Art. 1.14-2, Secs. 6(a), (c), (e).)
Sec. 981.104. DELIVERY TO INSURED OF REVISED SURPLUS LINES DOCUMENTS. (a) A surplus lines agent shall promptly deliver to the insured a substitute certificate, cover note, confirmation, or endorsement for the original document showing the current status of the coverage and the insurers responsible for that coverage if, after the delivery of the original document, a change is made:
(1) to the identity of the insurers;
(2) to the proportion of the direct risk assumed by the insurer as stated in the original document; or
(3) in any other material respect as to the insurance coverage evidenced by the document.
(b) A change made under Subsection (a) may not result in coverage or an insurance contract that would violate this chapter or Section 12, Article 1.14-2, if originally issued on that basis. (V.T.I.C. Art. 1.14-2, Sec. 6(d).)
Sec. 981.105. FILING WITH STAMPING OFFICE. (a) Not later than the 60th day after the later of the effective date or the issue date of new or renewal surplus lines insurance, a surplus lines agent shall file with the stamping office:
(1) a copy of the policy issued; or
(2) if the policy has not been issued, a copy of the certificate, cover note, or other confirmation of insurance delivered to the insured.
(b) A surplus lines agent shall also promptly file with the stamping office:
(1) a copy of each substitute certificate, cover note, or other confirmation of insurance delivered to an insured;
(2) a copy of each endorsement of an original policy, certificate, cover note, or other confirmation of insurance delivered to an insured; and
(3) a memorandum from the agent informing the stamping office of the substance of any change represented by a document described by Subdivision (1) or (2), as compared with the original coverage. (V.T.I.C. Art. 1.14-2, Sec. 6(b).)
[Sections 981.106-981.150 reserved for expansion]
SUBCHAPTER D. SURPLUS LINES STAMPING OFFICE
Sec. 981.151. STATUS AS NONPROFIT ASSOCIATION. The Surplus Lines Stamping Office of Texas is a nonprofit association. (V.T.I.C. Art. 1.14-2, Sec. 6A(a) (part).)
Sec. 981.152. BOARD OF DIRECTORS. (a) The board of directors of the stamping office exercises the powers of the office.
(b) The board consists of nine members appointed by the commissioner. Four members must represent the public and have a minimum of three years of experience in purchasing commercial insurance. A public representative may not:
(1) be an officer, director, or employee of an insurer, insurance agency, agent, broker, solicitor, or adjuster or any other business entity regulated by the department;
(2) be a person required to register under Chapter 305, Government Code; or
(3) be related to a person described by Subdivision (1) or (2) within the second degree by affinity or consanguinity.
(c) A board member serves a term as established in the plan of operation. (V.T.I.C. Art. 1.14-2, Secs. 6A(b) (part), (c).)
Sec. 981.153. PLAN OF OPERATION. (a) The procedures to administer the stamping office are established by a plan of operation approved by the commissioner. The plan of operation establishes the terms of the members of the board of directors of the office.
(b) The stamping office shall submit any amendment to the plan of operation to the commissioner. An amendment to the plan of operation is effective on approval by commissioner order.
(c) If the stamping office fails to submit a suitable amendment to the plan of operation, the commissioner may, after notice and hearing, adopt:
(1) an amendment to the plan of operation; and
(2) any rules necessary or advisable to implement this subchapter.
(d) A rule adopted under Subsection (c) continues until:
(1) modified by the commissioner; or
(2) superseded by an amendment to the plan of operation submitted by the stamping office and approved by the commissioner. (V.T.I.C. Art. 1.14-2, Secs. 6A(c) (part), (d) (part).)
Sec. 981.154. POWERS AND DUTIES. (a) The stamping office shall perform its functions under the plan of operation.
(b) The stamping office shall conduct the following activities as provided in the plan of operation:
(1) receive, record, and review each surplus lines insurance contract that a surplus lines agent is required to file with the office;
(2) provide to the commissioner an evaluation of the eligibility of each surplus lines insurance contract and surplus lines insurer;
(3) prepare monthly reports for the commissioner relating to surplus lines insurance obtained during the preceding month in a form adopted by the commissioner;
(4) prepare reports for the commissioner relating to surplus lines business;
(5) collect from each surplus lines agent a stamping fee for the costs of operations to be paid by the insured and determined by the department in an amount not to exceed three-fourths of one percent of gross premium resulting from surplus lines insurance contracts;
(6) employ persons;
(7) borrow money;
(8) enter into contracts;
(9) perform any other acts to facilitate or encourage compliance with this chapter and rules adopted under this chapter; and
(10) provide any other service incidental or related to an office purpose. (V.T.I.C. Art. 1.14-2, Sec. 6A(b) (part).)
Sec. 981.155. SUPERVISION BY COMMISSIONER. The commissioner shall supervise the stamping office. The stamping office is subject to the applicable provisions of this code and rules of the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 6A(b) (part).)
Sec. 981.156. EXAMINATION BY COMMISSIONER. (a) The commissioner shall examine the stamping office at any time the commissioner considers an examination necessary.
(b) The stamping office shall pay the cost of the examination.
(c) During an examination, a stamping office board member, officer, agent, or employee:
(1) may be examined under oath regarding the operation of the office; and
(2) shall make available any book, record, account, document, or agreement relating to the operation of the office. (V.T.I.C. Art. 1.14-2, Sec. 6A(e).)
Sec. 981.157. IMMUNITY FROM LIABILITY. A person or entity is not liable for, and a cause of action does not arise out of, an act or omission in performing a power or duty under this subchapter if the person or entity is:
(1) the stamping office or a board member, officer, agent, or employee of the stamping office; or
(2) the department or an employee or representative of the department, including the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 6A(f).)
Sec. 981.158. EXEMPTION FROM PUBLIC INFORMATION LAW. (a) An individual surplus lines insurance contract filed with the stamping office is:
(1) confidential; and
(2) not public information under Chapter 552, Government Code.
(b) This section does not prevent access by a state agency to an individual surplus lines insurance contract filed with the stamping office. (V.T.I.C. Art. 1.14-2, Sec. 6A(h).)
Sec. 981.159. EXEMPTION FROM LIBRARY AND ARCHIVES LAW. Chapter 441, Government Code, does not apply to the stamping office or its records. (V.T.I.C. Art. 1.14-2, Sec. 6A(g).)
Sec. 981.160. NO ENFORCEMENT AUTHORITY. This subchapter does not give the stamping office authority to enforce this chapter or Section 12, Article 1.14-2. (V.T.I.C. Art. 1.14-2, Sec. 6A(b) (part).)
[Sections 981.161-981.200 reserved for expansion]
SUBCHAPTER E. SURPLUS LINES AGENTS
Sec. 981.201. DEFINITION. In this subchapter, "managing general agent" means an agent licensed under the Managing General Agents' Licensing Act (Article 21.07-3, Vernon's Texas Insurance Code). (V.T.I.C. Art. 1.14-2, Sec. 2(a)(1) (part); New.)
Sec. 981.202. SURPLUS LINES LICENSE REQUIRED. An agent licensed by this state may not issue or cause to be issued an insurance contract with an eligible surplus lines insurer unless the agent possesses a surplus lines license issued by the department. (V.T.I.C. Art. 1.14-2, Sec. 4(a).)
Sec. 981.203. QUALIFICATIONS FOR SURPLUS LINES LICENSE; LICENSE TERM. (a) The department may issue a surplus lines license to:
(1) an agent who resides in this state and:
(A) is authorized under Article 21.14; or
(B) is a managing general agent; or
(2) a nonresident insurance agent authorized under Article 21.11 who is granted a surplus lines license for the limited purpose of acting on behalf of a purchasing group operating in this state in the placement of liability insurance for a risk located in this state.
(b) The agent must:
(1) pay an application fee set by the commissioner in an amount not to exceed $50;
(2) submit a completed license application on a form approved by the commissioner;
(3) pass an examination under Section 981.205; and
(4) provide proof of financial responsibility under Section 981.206.
(c) Unless the commissioner adopts a system for staggered renewal of licenses under Article 21.01-2:
(1) a surplus lines license, other than an initial license, is valid for a two-year term that expires on December 31; and
(2) the term of an initial license expires on December 31 of the year following the year in which the license is issued. (V.T.I.C. Art. 1.14-2, Secs. 2(a)(1) (part), (2) (part), 3(a) (part), 4(b) (part), (c) (part).)
Sec. 981.204. CLASSIFICATION OF SURPLUS LINES AGENTS. The department may classify surplus lines agents and issue a surplus lines license to an agent in accordance with:
(1) a classification created under this section; and
(2) reasonable rules of the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 2(a)(4).)
Sec. 981.205. EXAMINATION. (a) A surplus lines agent must pass an examination approved by the department.
(b) If the surplus lines agent is a:
(1) general partnership or a registered limited liability partnership, each individual acting as a partner must pass the examination;
(2) corporation, each individual acting as an officer, director, or shareholder of the corporation must pass the examination; or
(3) limited liability company, each individual acting as an officer, manager, or member of the company must pass the examination.
(c) Unless the department accepts under Article 21.01-1 a qualifying examination administered by a testing service, each individual required to be examined must pay a fee before being examined at the time and place for the examination. The commissioner shall set the fee in an amount not to exceed $20.
(d) A new examination fee must be paid before each examination.
(e) An examination fee may not be refunded unless the individual:
(1) not later than 24 hours before the time the examination begins, notifies the commissioner that the individual will not take the examination;
(2) receives the commissioner's permission to not take the examination; and
(3) does not appear to take the examination. (V.T.I.C. Art. 1.14-2, Secs. 4(b) (part), (h).)
Sec. 981.206. FINANCIAL RESPONSIBILITY. A surplus lines agent must provide proof to the department of:
(1) financial solvency and a demonstrated capacity regarding responsibility to insureds under surplus lines insurance policies; or
(2) an adequate bond and surety regarding transactions with insureds under surplus lines insurance policies, as provided by reasonable rules of the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 2(a)(2) (part).)
Sec. 981.207. DUPLICATE SURPLUS LINES LICENSE. (a) A surplus lines agent may request a duplicate surplus lines license.
(b) The commissioner must collect a duplicate surplus lines license fee from the surplus lines agent before providing the duplicate to the agent.
(c) The commissioner shall set the fee in an amount not to exceed $20. (V.T.I.C. Art. 1.14-2, Sec. 4(f).)
Sec. 981.208. RENEWAL OF SURPLUS LINES LICENSE. On or before the date a surplus lines license expires, the agent may renew the license for a two-year period. To renew the license, the agent must:
(1) file a completed written application on a form prescribed by the commissioner; and
(2) pay the renewal fee in the amount set by the commissioner, not to exceed $50. (V.T.I.C. Art. 1.14-2, Secs. 4(c) (part), (d).)
Sec. 981.209. FEES. (a) The department shall deposit a fee collected under this subchapter to the credit of the Texas Department of Insurance operating account.
(b) A fee collected under this subchapter is not refundable, except as provided by Section 981.205. (V.T.I.C. Art. 1.14-2, Sec. 4(g).)
Sec. 981.210. PLACEMENT OF COVERAGE. A surplus lines agent may not place surplus lines coverage with an insurer unless:
(1) the insurer meets the eligibility requirements of Subchapter B; and
(2) the stamping office provides evidence to the department that the insurer meets those requirements. (V.T.I.C. Art. 1.14-2, Sec. 8(b) (part).)
Sec. 981.211. FINANCIAL CONDITION OF SURPLUS LINES INSURERS. (a) A surplus lines agent must make a reasonable effort to determine the financial condition of an eligible surplus lines insurer before placing insurance with that insurer.
(b) A surplus lines agent may not knowingly place surplus lines insurance with a financially unsound insurer. (V.T.I.C. Art. 1.14-2, Sec. 8(a).)
Sec. 981.212. ACCEPTING SURPLUS LINES INSURANCE FROM OTHER AGENTS. (a) A surplus lines agent may originate surplus lines insurance or accept surplus lines insurance from another agent who is licensed to handle the kind of insurance being accepted.
(b) A surplus lines agent who accepts surplus lines insurance from an agent may share a commission with that agent. (V.T.I.C. Art. 1.14-2, Sec. 14.)
Sec. 981.213. FILING CONTRACT WITH STAMPING OFFICE. A surplus lines agent shall report to and file with the stamping office a copy of each surplus lines insurance contract as provided in the stamping office's plan of operation. The department may accept that filing instead of the filings required under Section 981.105. (V.T.I.C. Art. 1.14-2, Sec. 6A(a) (part).)
Sec. 981.214. COMPLIANCE WITH STAMPING OFFICE PLAN OF OPERATION. A surplus lines agent shall comply with the stamping office's plan of operation. (V.T.I.C. Art. 1.14-2, Sec. 6A(d) (part).)
Sec. 981.215. SURPLUS LINES AGENT RECORDS. (a) A surplus lines agent shall keep in the agent's office in this state a complete record of each surplus lines contract obtained by the agent, including any of the following, if applicable:
(1) a copy of the daily report;
(2) the amount of the insurance and risks insured against;
(3) a brief general description of the property insured and the location of that property;
(4) the gross premium charged;
(5) the return premium paid;
(6) the rate of premium charged on the different items of property;
(7) the contract terms, including the effective date;
(8) the insured's name and post office address;
(9) the insurer's name and home office address;
(10) the amount collected from the insured; and
(11) any other information required by the commissioner.
(b) The surplus lines agent shall keep the record required by this section open for examination by the department without notice at any time until the third anniversary of the date the surplus lines contract expires or is canceled. (V.T.I.C. Art. 1.14-2, Sec. 15.)
Sec. 981.216. ANNUAL REPORT. (a) Before March 1 of each year, a surplus lines agent shall submit a report to the department for the preceding calendar year.
(b) The commissioner shall adopt the form for the annual report.
(c) The annual report must:
(1) demonstrate that the amount of insurance obtained from each eligible surplus lines insurer is only the amount that exceeds the amount obtainable from an authorized insurer; and
(2) include any other information required by the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 16.)
Sec. 981.217. NOTICE TO DEPARTMENT REQUIRED. (a) A surplus lines agent shall notify the department not later than the 30th day after the date any of the following occurs:
(1) balances due for more than 90 days to an eligible surplus lines insurer or for more than 60 days to the agent acting on behalf of the surplus lines insurer exceed $1 million or 10 percent of the insurer's policyholder surplus calculated on December 31 of the preceding year;
(2) balances due for more than 60 days from a managing general agent or a local recording agent appointed by or reporting to the managing general agent exceed $500,000;
(3) authority to settle claims for an eligible surplus lines insurer is withdrawn;
(4) funds held for an eligible surplus lines insurer for losses are greater than $100,000 more than the amount necessary to pay losses and loss adjustment expenses expected to be paid on behalf of the insurer in the next 60-day period; or
(5) the agent's contract to act on behalf of a surplus lines insurer is canceled or terminated.
(b) The commissioner shall adopt the form to be used under Subsection (a).
(c) A surplus lines agent may comply with the notification requirement under Subsections (a)(1), (2), and (4) by submitting a single annual report if:
(1) the agent or applicable eligible surplus lines insurer routinely operates beyond the limits provided by those subdivisions; and
(2) the commissioner verifies that fact under a procedure adopted by the commissioner. (V.T.I.C. Art. 1.14-2, Sec. 15A.)
Sec. 981.218. DEPARTMENT MONITORING OF SURPLUS LINES AGENTS. The department shall monitor the activities of surplus lines agents as necessary to protect the public interest. (V.T.I.C. Art. 1.14-2, Sec. 3A (part).)
Sec. 981.219. ADVERTISING. A surplus lines agent may advertise regarding the agent's ability to place surplus lines insurance permitted by this chapter. (V.T.I.C. Art. 1.14-2, Sec. 13.)
Sec. 981.220. MANAGING GENERAL AGENTS; LIMITED AUTHORITY OF CERTAIN AGENTS. (a) A managing general agent is not required to hold a local recording agent license to be eligible to receive a surplus lines license.
(b) A surplus lines license granted to a managing general agent who is not also licensed under Article 21.14 is limited to the acceptance of business originating through a licensed local recording agent. The license does not authorize the agent to engage in business directly with the insurance applicant. (V.T.I.C. Art. 1.14-2, Secs. 2(a)(1) (part), (3).)
CHAPTER 982. FOREIGN AND ALIEN INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 982.001. DEFINITIONS
Sec. 982.002. APPLICABILITY OF CHAPTER
Sec. 982.003. LIFE INSURANCE COMPANIES WANTING TO LOAN
MONEY
Sec. 982.004. FINANCIAL STATEMENTS OF FOREIGN OR ALIEN
COMPANIES
[Sections 982.005-982.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 982.051. CERTIFICATE OF AUTHORITY REQUIRED FOR LIFE,
HEALTH, OR ACCIDENT COMPANIES
Sec. 982.052. CERTIFICATE OF AUTHORITY REQUIRED FOR OTHER
COMPANIES
[Sections 982.053-982.100 reserved for expansion]
SUBCHAPTER C. REQUIREMENTS FOR CERTIFICATE OF AUTHORITY
Sec. 982.101. FILING OF FINANCIAL STATEMENT BY LIFE,
HEALTH, OR ACCIDENT INSURANCE COMPANY
Sec. 982.102. FILING OF FINANCIAL STATEMENT BY OTHER
INSURANCE COMPANY; EXAMINATION
Sec. 982.103. FILING OF FINANCIAL STATEMENT BY ALIEN
COMPANY
Sec. 982.104. FILING OF ARTICLES OF INCORPORATION
Sec. 982.105. CAPITAL STOCK AND SURPLUS REQUIREMENTS
FOR LIFE, HEALTH, OR ACCIDENT INSURANCE
COMPANIES
Sec. 982.106. CAPITAL STOCK AND SURPLUS REQUIREMENTS FOR
OTHER INSURANCE COMPANIES
Sec. 982.107. APPLICABILITY OF OTHER LAW
Sec. 982.108. DEPOSIT REQUIREMENTS FOR ALIEN COMPANIES
Sec. 982.109. DURATION OF DEPOSIT BY LIFE, HEALTH, OR
ACCIDENT INSURANCE COMPANIES
Sec. 982.110. DURATION OF DEPOSIT FOR OTHER INSURANCE
COMPANIES
Sec. 982.111. EXCEPTION TO DEPOSIT REQUIREMENT: TRUSTEED
ASSETS
Sec. 982.112. EXCEPTION TO DEPOSIT REQUIREMENT: DEPOSIT WITH
OFFICER IN ANOTHER STATE
Sec. 982.113. ISSUANCE OF CERTIFICATE OF AUTHORITY TO LIFE,
HEALTH, OR ACCIDENT INSURANCE COMPANY
[Sections 982.114-982.200 reserved for expansion]
SUBCHAPTER D. TRUSTEED ASSETS OF ALIEN COMPANIES
Sec. 982.201. DEED OF TRUST: GENERAL PROVISIONS
Sec. 982.202. DEED OF TRUST: APPROVAL BY COMMISSIONER
Sec. 982.203. LOCATION OF TRUSTEED ASSETS
Sec. 982.204. WITHDRAWAL OF TRUSTEED ASSETS
[Sections 982.205-982.250 reserved for expansion]
SUBCHAPTER E. TRUSTEED SURPLUS OF ALIEN COMPANIES
Sec. 982.251. TRUSTEED SURPLUS OF ALIEN COMPANY
Sec. 982.252. FORM AND CONTENTS OF FINANCIAL STATEMENT OF
ALIEN COMPANY
Sec. 982.253. IMPAIRMENT OF TRUSTEED SURPLUS
Sec. 982.254. FAILURE TO ELIMINATE IMPAIRMENT OF TRUSTEED
SURPLUS
Sec. 982.255. EXAMINATION OF ALIEN COMPANY
[Sections 982.256-982.300 reserved for expansion]
SUBCHAPTER F. PROVISIONS APPLICABLE TO CERTAIN COMPANIES
Sec. 982.301. APPLICABILITY OF SUBCHAPTER
Sec. 982.302. REINSURANCE NOT PROHIBITED
Sec. 982.303. TEXAS LAW ACCEPTED
Sec. 982.304. SAME OR DECEPTIVELY SIMILAR NAME
Sec. 982.305. LIMITATION ON ACTIONS IN OTHER STATE
COURTS
Sec. 982.306. DEPOSIT FOR FOREIGN CASUALTY COMPANY
NOT REQUIRED
CHAPTER 982. FOREIGN AND ALIEN INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 982.001. DEFINITIONS. In this chapter:
(1) "Accident insurance company," "health insurance company," "life insurance company," and "United States branch" have the meanings assigned by Section 841.001.
(2) "Alien company" means an insurance company organized under the laws of a foreign country. The term includes an unincorporated insurance company (other than an unincorporated life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company) that is organized under the laws of a foreign country in a form recognized by the department.
(3) "Domestic insurance company" and "policyholder" have, in the context of a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company, the meanings assigned by Section 841.001.
(4) "Foreign company" means an insurance company organized under the laws of another state.
(5) "Insurance company" means a company engaged as a principal in the business of insurance.
(6) "Trusteed asset" means an asset that an authorized alien company is required or permitted by this chapter to deposit with one or more trustees for the security of the company's policyholders in the United States. (V.T.I.C. Art. 3.01, Secs. 1, 2, 3, 4, 5, 6, 7A, 8, 13; Art. 3.27-1, Subsec. (a) (part); Art. 21.43, Secs. 1, 10(a) (part).)
Sec. 982.002. APPLICABILITY OF CHAPTER. This chapter applies to any insurance company that is organized under the laws of another state or country and that wants to engage in or is engaging in the business of insurance in this state. (V.T.I.C. Art. 3.20; Art. 21.43, Sec. 2.)
Sec. 982.003. LIFE INSURANCE COMPANIES WANTING TO LOAN MONEY. A life insurance company that wants to loan money in this state but does not want to engage in the business of life insurance in this state may obtain from the secretary of state a permit to loan money by complying with the laws of this state relating to foreign corporations engaged in loaning money in this state without having to obtain a certificate of authority to engage in the business of life insurance in this state. (V.T.I.C. Art. 3.27.)
Sec. 982.004. FINANCIAL STATEMENTS OF FOREIGN OR ALIEN COMPANIES. (a) Each foreign company shall file with the department a statement in the form required by Section 982.101 or 982.102 not later than March 1 of each year.
(b) Each authorized alien company shall file with the department a financial statement in the form required by Section 982.252 not later than March 1 of each year. (V.T.I.C. Art. 3.20-1, Subsec. (b); Art. 3.27-2, Subsec. (a) (part); Art. 21.43, Secs. 4(b), 11(a) (part).)
[Sections 982.005-982.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 982.051. CERTIFICATE OF AUTHORITY REQUIRED FOR LIFE, HEALTH, OR ACCIDENT COMPANIES. A foreign company may not engage in the business of insurance as a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company in this state, except for the lending of money, without first obtaining from the department a certificate of authority that:
(1) shows that the company has fully complied with the laws of this state; and
(2) authorizes the company to engage in the business of insurance in this state. (V.T.I.C. Art. 3.57 (part).)
Sec. 982.052. CERTIFICATE OF AUTHORITY REQUIRED FOR OTHER COMPANIES. A foreign company or alien company, other than a life insurance company, accident insurance company, life and accident insurance company, or life, health, and accident insurance company, may not engage in this state in the business of insuring others against losses without first obtaining from the department a certificate of authority that authorizes the company to engage in that business. (V.T.I.C. Art. 21.43, Sec. 3(a).)
[Sections 982.053-982.100 reserved for expansion]
SUBCHAPTER C. REQUIREMENTS FOR CERTIFICATE OF AUTHORITY
Sec. 982.101. FILING OF FINANCIAL STATEMENT BY LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANY. A foreign or alien life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company that wants to engage in the business of insurance in this state shall provide to the department a written or printed statement, under the oath of the president or vice president or under the oath of the treasurer and secretary of the company, that shows:
(1) the company's name and location;
(2) the amount of the company's capital stock;
(3) the amount of the company's paid up capital stock;
(4) the company's assets, including in the following order:
(A) the amount of cash on hand;
(B) the amount of cash held by other persons and the names and residences of those persons;
(C) unencumbered real estate, its location, and its value;
(D) bonds the company owns, the manner in which the bonds are secured, and the rate of interest on the bonds;
(E) debts due the company that are secured by mortgage, a description of the mortgaged property, and the property's market value;
(F) debts due the company that are secured other than by mortgage and a statement of how they are secured;
(G) debts due the company for premiums; and
(H) all other money and securities;
(5) the amount of the company's liabilities and the name of the person or corporation to whom each liability is owed;
(6) losses adjusted and due;
(7) losses adjusted and not due;
(8) losses adjusted;
(9) losses in suspense and the reason for the suspension;
(10) all other claims against the company and a description of each claim; and
(11) any additional facts required by the department to be shown. (V.T.I.C. Art. 3.20-1, Subsec. (a).)
Sec. 982.102. FILING OF FINANCIAL STATEMENT BY OTHER INSURANCE COMPANY; EXAMINATION. (a) This section applies only to a foreign or alien company, other than a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company.
(b) A foreign or alien company that wants to engage in the business of insurance in this state shall provide to the department copies of its annual financial statements for the two most recent years. The copies must be certified by the commissioner or other insurance supervising official of the state or country in which the company is organized and incorporated. The department may require that the statement show additional facts as requested by the department.
(c) Before issuing a certificate of authority to engage in the business of insurance in this state to a foreign or alien company, the commissioner shall:
(1) examine the company, at the company's expense, at its principal office in the United States; or
(2) accept a report of an examination made by the insurance department or other insurance supervisory official of another state or government of a foreign country. (V.T.I.C. Art. 21.43, Secs. 4(a), 6.)
Sec. 982.103. FILING OF FINANCIAL STATEMENT BY ALIEN COMPANY. An alien company that wants to engage in the business of insurance in this state shall file a financial statement as provided by Section 982.252. (V.T.I.C. Art. 3.20-1, Subsec. (c); Art. 21.43, Sec. 4(c).)
Sec. 982.104. FILING OF ARTICLES OF INCORPORATION. (a) A foreign or alien company shall file with the statement required by Section 982.101 or 982.102:
(1) a copy of the company's acts or articles of incorporation and any amendments to those acts or articles; and
(2) a copy of the company's bylaws and a statement of the name and residence of each of the company's officers and directors.
(b) The president or the secretary of the company shall certify the documents filed under Subsection (a). (V.T.I.C. Art. 3.21; Art. 21.43, Sec. 5.)
Sec. 982.105. CAPITAL STOCK AND SURPLUS REQUIREMENTS FOR LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES. (a) A foreign or alien life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company is subject to Sections 841.054, 841.201, 841.204, 841.205, 841.207, 841.301, and 841.302. The department may not issue a certificate of authority to a foreign or alien stock insurance company, and the company may not engage in any business of life, health, or accident insurance in this state, unless the company possesses at least the minimum capital and surplus required for a similar domestic insurance company organized under Chapter 841 in similar circumstances. The minimum capital and surplus must be invested in the same character of investments as required for a domestic insurance company.
(b) The department may not issue a certificate of authority to a foreign or alien mutual insurance company, and the company may not engage in the business of life insurance in this state, unless the company possesses at least the minimum unencumbered surplus required by Chapter 882 for a similar domestic company in similar circumstances. The minimum unencumbered surplus must be invested in the same character of investments as required for a domestic insurance company. (V.T.I.C. Arts. 3.22, 3.27-4 (part).)
Sec. 982.106. CAPITAL STOCK AND SURPLUS REQUIREMENTS FOR OTHER INSURANCE COMPANIES. (a) This section applies only to a foreign or alien company other than a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company.
(b) A foreign or alien company is subject to Sections 822.203, 822.205, 822.210, and 822.212. The department may not authorize a foreign or alien company to engage in the business of insurance in this state unless the company has and maintains the minimum capital and surplus amounts as required by this code for companies organized under this code and engaging in the same kinds of business.
(c) The department may not deny authorization for a foreign or alien company to engage in the business of insurance in this state because all of the company's capital stock has not been fully subscribed and paid for, if:
(1) at least the minimum dollar amount of capital stock of the company required by the laws of this state, which may be less than all of the company's authorized capital stock, has been subscribed and paid for; and
(2) the company:
(A) has at least the minimum dollar amount of surplus required by the laws of this state for the kinds of business the company seeks to write; and
(B) has fully complied with the laws of the company's domiciliary state or country relating to authorization and issuance of capital stock. (V.T.I.C. Art. 21.43, Sec. 13(a); Art. 21.44, Subsecs. (a), (b) (part).)
Sec. 982.107. APPLICABILITY OF OTHER LAW. Article 21.49-8 applies to a foreign or alien company. (V.T.I.C. Art. 3.27-4 (part); Art. 21.44, Subsec. (b) (part).)
Sec. 982.108. DEPOSIT REQUIREMENTS FOR ALIEN COMPANIES. An alien company may not engage in the business of insurance in this state without first depositing with the comptroller, for the benefit of the company's policyholders who are citizens or residents of the United States, bonds or securities of the United States or this state in an amount at least equal to:
(1) the minimum capital required to be maintained by a domestic stock insurer authorized to engage in the same kind of insurance; or
(2) one-half the minimum unencumbered surplus required to be maintained by a domestic mutual insurer authorized to engage in the same kind of insurance. (V.T.I.C. Art. 3.23, Subsec. (a); Art. 21.43, Sec. 7(a).)
Sec. 982.109. DURATION OF DEPOSIT BY LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES. An alien life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company shall maintain the deposit required by Section 982.108 for the period that the company has any outstanding liability arising from its insurance transactions in the United States. The deposit is liable to pay the judgments, as decreed by courts, of the company's policyholders in the United States. (V.T.I.C. Art. 3.24.)
Sec. 982.110. DURATION OF DEPOSIT FOR OTHER INSURANCE COMPANIES. An alien company, other than an alien life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company, shall maintain the deposit required by Section 982.108 for the period that the company has any outstanding liability arising from its insurance transactions in the United States. The deposit is for the exclusive benefit, security, and protection of the company's policyholders in the United States. (V.T.I.C. Art. 21.43, Sec. 8.)
Sec. 982.111. EXCEPTION TO DEPOSIT REQUIREMENT: TRUSTEED ASSETS. (a) On approval by the commissioner as provided by Subchapter D, instead of making the deposit with the comptroller under Section 982.108, an authorized alien company may deposit bonds or securities of the United States or this state with a trustee or trustees for the security of the company's policyholders in the United States.
(b) An alien company shall maintain the deposit permitted by Subsection (a) as provided by Subchapter D. (V.T.I.C. Art. 3.23, Subsec. (b); Art. 21.43, Sec. 7(b).)
Sec. 982.112. EXCEPTION TO DEPOSIT REQUIREMENT: DEPOSIT WITH OFFICER IN ANOTHER STATE. (a) The deposit required under Section 982.108 is not required in this state if the deposit required by that section has been made in any state of the United States, under the laws of that state, in a manner that secures equally the policyholders of the company who are citizens and residents of the United States.
(b) An alien company that desires to meet the requirements of Section 982.108 as provided by Subsection (a) shall file with the department a certificate of the deposit. The certificate must be signed by and under the seal of the officer of the state with whom the deposit was made. (V.T.I.C. Art. 3.26; Art. 21.43, Sec. 7(c).)
Sec. 982.113. ISSUANCE OF CERTIFICATE OF AUTHORITY TO LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANY. (a) The commissioner shall file in the commissioner's office the documents delivered to the department under this subchapter and shall issue to a foreign or alien life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company a certificate of authority to engage in this state in the kind of business specified in the documents if:
(1) the company has complied with the requirements of this chapter and any other requirement imposed on the company by law; and
(2) the company's operational history demonstrates that the expanded operation of the company in this state or its operations outside this state will not be hazardous to the company's policyholders or creditors or to the public.
(b) The operational history of a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company under Subsection (a)(2) must be reviewed in conjunction with:
(1) the company's loss experience;
(2) the kinds and nature of risks insured by the company;
(3) the company's financial condition and its ownership;
(4) the company's proposed method of operation;
(5) the company's affiliations;
(6) the company's investments;
(7) the company's contracts, if any, leading to contingent liability or agreements in respect to guaranty and surety, other than insurance; and
(8) the ratio of total annual premium and net investment income to commission expenses, general insurance expenses, policy benefits paid, and required policy reserve increases. (V.T.I.C. Art. 3.24-1 (part).)
[Sections 982.114-982.200 reserved for expansion]
SUBCHAPTER D. TRUSTEED ASSETS OF ALIEN COMPANIES
Sec. 982.201. DEED OF TRUST: GENERAL PROVISIONS. (a) A deed of trust relating to the trusteed assets of an authorized alien company and all amendments to the deed of trust are effective only if approved by the commissioner.
(b) The deed of trust must contain provisions that:
(1) vest legal title to trusteed assets in the trustee or trustees and the trustees' lawfully appointed successors, in trust for the security of the policyholders of the alien company in the United States;
(2) provide for substitution of a new trustee or trustees, subject to the commissioner's approval, in the event of vacancy by death, resignation, or other incapacity; and
(3) require that the trustee or trustees continuously maintain a record sufficient to identify the trusteed assets.
(c) The deed of trust may provide that income, earnings, dividends, or interest accumulations of the trusteed assets may be paid over to the United States manager of the alien company on request.
(d) The deed of trust and all amendments to the deed of trust must be authenticated in the form and manner prescribed by the commissioner. (V.T.I.C. Art. 3.27-1, Subsecs. (b), (f), (g); Art. 21.43, Secs. 10(b), (f), (g).)
Sec. 982.202. DEED OF TRUST: APPROVAL BY COMMISSIONER. (a) The commissioner shall approve a deed of trust relating to the trusteed assets of an alien company if the commissioner determines:
(1) the deed of trust or its amendments are sufficient in form and conform with applicable law;
(2) the trustee or trustees are eligible to serve in that capacity; and
(3) the deed of trust is adequate to protect the interests of the beneficiaries of the trust.
(b) If, after notice and hearing, the commissioner determines that a requisite for approval of a deed of trust under Subsection (a) does not exist, the commissioner may withdraw approval.
(c) The commissioner may approve a change in any deed of trust that in the commissioner's judgment is in the best interests of the policyholders of the alien company in the United States. (V.T.I.C. Art. 3.27-1, Subsecs. (c), (d), (e); Art. 21.43, Secs. 10(c), (d), (e).)
Sec. 982.203. LOCATION OF TRUSTEED ASSETS. (a) The trusteed assets of an alien company shall be kept continuously in the United States.
(b) The trusteed assets of an alien company that enters the United States through this state shall be kept continuously in this state. (V.T.I.C. Art. 3.27-1, Subsec. (a) (part); Art. 21.43, Sec. 10(a) (part).)
Sec. 982.204. WITHDRAWAL OF TRUSTEED ASSETS. (a) The deed of trust relating to the trusteed assets of an alien company must provide that the trustee or trustees may not make or permit a withdrawal of assets, other than as specified by Section 982.201(c), without the commissioner's prior written approval except to:
(1) make deposits required by law in any state for the security or benefit of the policyholders of the company in the United States;
(2) substitute other assets permitted by law and at least equal in value to those withdrawn, subject to Subsection (b); or
(3) transfer the assets to an official liquidator or rehabilitator in accordance with an order of a court of competent jurisdiction.
(b) A withdrawal under Subsection (a)(2) may be made only on the specific written direction of the United States manager or an assistant United States manager when authorized and acting under general or specific written authority previously given or delegated by the board of directors.
(c) On withdrawal of trusteed assets deposited in another state in which the alien company is authorized to engage in the business of insurance:
(1) the deed of trust may require similar written approval of the insurance supervising official of that state instead of the commissioner's approval as provided by Subsection (a); and
(2) if approval under Subdivision (1) is required, the company shall notify the commissioner in writing of the nature and extent of the withdrawal. (V.T.I.C. Art. 3.27-1, Subsecs. (h), (i); Art. 21.43, Secs. 10(h), (i).)
[Sections 982.205-982.250 reserved for expansion]
SUBCHAPTER E. TRUSTEED SURPLUS OF ALIEN COMPANIES
Sec. 982.251. TRUSTEED SURPLUS OF ALIEN COMPANY. The total value of an alien company's general state deposits and trusteed assets less the total net amount of all the company's liabilities and reserves in the United States, as determined in accordance with Section 982.252, is the company's trusteed surplus in the United States. (V.T.I.C. Art. 3.27-2, Subsec. (e) (part); Art. 21.43, Sec. 11(e) (part).)
Sec. 982.252. FORM AND CONTENTS OF FINANCIAL STATEMENT OF ALIEN COMPANY. (a) A financial statement required to be filed by an alien company under Section 982.004 must be on a form prescribed by the commissioner and must show, as of the preceding December 31:
(1) the company's general deposits of assets in the United States deposited with officers of any state in trust for the exclusive benefit, security, and protection of the company's policyholders in the United States;
(2) the company's special deposits of assets in the United States deposited with officers of any state in trust for the exclusive benefit, security, and protection of the company's policyholders in a particular state;
(3) the company's trusteed assets in the United States held for the exclusive benefit, security, and protection of the company's policyholders in the United States;
(4) the company's reserves and other liabilities arising out of policies or obligations issued, assumed, or incurred in the United States; and
(5) any further information as determined necessary to implement this section.
(b) In addition to the requirements under Subsection (a), a financial statement filed by an alien life insurance company must show the amount of the company's policy loans to policyholders in the United States, not exceeding the amount of the legal reserve required on each policy.
(c) In determining the net amount of an alien company's liabilities in the United States, the company may deduct:
(1) reinsurance on losses with insurers qualifying for credit, less unpaid reinsurance premiums, with a schedule showing by company the amount deducted; and
(2) unearned premiums on agents' balances or uncollected premiums not more than 90 days past due.
(d) Any liability on an asset not considered in the statement may be applied against that asset.
(e) A special state deposit held for the exclusive benefit of policyholders of a particular state may be allowed as an offset against the alien company's liabilities in that state only.
(f) The statement may include accrued interest at the date of the statement on assets deposited with states and trustees if the interest is collected by the states or trustees.
(g) The United States manager, attorney-in-fact, or authorized assistant United States manager of the alien company shall sign and verify the statement. The United States trustee or trustees shall certify the items of securities and other property held under deeds of trust.
(h) The commissioner may at any time and for any period determined necessary require additional statements of the kind required by this section. (V.T.I.C. Art. 3.27-2, Subsecs. (a) (part), (b), (c), (d), (f); Art. 21.43, Secs. 11(a) (part), (b), (c), (d), (f).)
Sec. 982.253. IMPAIRMENT OF TRUSTEED SURPLUS. (a) If the commissioner determines from a statement filed under Section 982.252 or any report that an alien company's trusteed surplus is less than the greater of the minimum capital required of, or the minimum surplus required to be maintained by, a domestic insurance company authorized to engage in the same kinds of insurance, the commissioner shall:
(1) determine the amount of the impairment; and
(2) order the company, through its United States manager or attorney, to eliminate the impairment within the period designated by the commissioner.
(b) The period for eliminating an impairment under Subsection (a) must end not later than the 90th day after the date the order is served.
(c) The commissioner may also by order revoke or suspend an alien company's certificate of authority or prohibit the company from issuing new policies in the United States while an impairment under Subsection (a) exists. (V.T.I.C. Art. 3.27-2, Subsec. (e) (part); Art. 21.43, Sec. 11(e) (part).)
Sec. 982.254. FAILURE TO ELIMINATE IMPAIRMENT OF TRUSTEED SURPLUS. If an alien company has not satisfied the commissioner at the end of the designated period under Section 982.253(a) that the impairment has been eliminated, the commissioner may proceed against the company as provided by Article 21.28-A as an insurance company whose further transaction of the business of insurance in the United States will be hazardous to its policyholders in the United States. (V.T.I.C. Art. 3.27-2, Subsec. (e) (part); Art. 21.43, Sec. 11(e) (part).)
Sec. 982.255. EXAMINATION OF ALIEN COMPANY. (a) The books, records, accounting, and verification relating to an authorized alien company's trusteed assets are subject to examination by the department or the department's appointed representative at the United States branch office of the company, in the same manner and to the same extent that applies under Articles 1.15 and 1.16 to domestic and foreign insurance companies authorized to engage in the same kind of insurance.
(b) The books, records, and accounting for trusteed assets of an alien company that enters the United States through this state shall be maintained in English in the company's branch office in this state. (V.T.I.C. Art. 3.27-3; Art. 21.43, Sec. 12.)
[Sections 982.256-982.300 reserved for expansion]
SUBCHAPTER F. PROVISIONS APPLICABLE TO CERTAIN COMPANIES
Sec. 982.301. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a foreign or alien company that is not a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company. (New.)
Sec. 982.302. REINSURANCE NOT PROHIBITED. This chapter does not prohibit a foreign company from:
(1) reinsuring a domestic insurance company; or
(2) locating in this state, if the company does not directly insure persons domiciled in this state or insure against risks located in this state. (V.T.I.C. Art. 21.43, Sec. 3(b).)
Sec. 982.303. TEXAS LAW ACCEPTED. A foreign or alien company that issues a contract or policy in this state is considered to have agreed to comply with this code as a prerequisite to engaging in the business of insurance in this state. (V.T.I.C. Art. 21.43, Sec. 9.)
Sec. 982.304. SAME OR DECEPTIVELY SIMILAR NAME. A foreign or alien company may not be denied permission to engage in the business of insurance in this state because the name of the company is the same as or deceptively similar to the name of a domestic corporation existing under the laws of this state or of another foreign or alien company authorized to engage in the business of insurance in this state if the company desiring to engage in the business of insurance in this state:
(1) files with the department and with any county clerk as provided by Section 36.10 or 36.11, Business & Commerce Code, an assumed name certificate stating a name permitted under the laws of this state; and
(2) does not engage in any business in this state except under the assumed name. (V.T.I.C. Art. 21.43, Sec. 13(c).)
Sec. 982.305. LIMITATION ON ACTIONS IN OTHER STATE COURTS. An action involving a contract entered into in this state between a foreign or alien company and a resident of this state may not be brought in or transferred to a court in another state without the consent of the resident of this state. (V.T.I.C. Art. 21.43, Sec. 13(d).)
Sec. 982.306. DEPOSIT FOR FOREIGN CASUALTY COMPANY NOT REQUIRED. (a) The department may not require a foreign casualty insurance company to make or maintain the deposit required of a domestic casualty insurance company by Section 861.252 if a similar deposit has been made in any state of the United States, under the laws of that state, in a manner that secures equally all policyholders of the company who are citizens and residents of the United States.
(b) A certificate of the deposit under the signature and seal of the officer of the other state with whom the deposit is made must be filed with the department. (V.T.I.C. Art. 21.43, Sec. 13(b).)
CHAPTER 983. REDOMESTICATION OF
INSURERS AND HEALTH MAINTENANCE ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 983.001. DEFINITION
Sec. 983.002. RULES
[Sections 983.003-983.050 reserved for expansion]
SUBCHAPTER B. REDOMESTICATION PROCESS
Sec. 983.051. REDOMESTICATION: FOREIGN TO DOMESTIC
Sec. 983.052. REDOMESTICATION: DOMESTIC TO FOREIGN
Sec. 983.053. REDOMESTICATION: FOREIGN TO FOREIGN
Sec. 983.054. NOTICE AND FILING REQUIRED
Sec. 983.055. FORMS OF INSURANCE POLICY OR EVIDENCE OF
COVERAGE
Sec. 983.056. OUTSTANDING INSURANCE POLICY OR EVIDENCE
OF COVERAGE: CHANGE OF NAME
Sec. 983.057. ISSUANCE OF AMENDED CERTIFICATE OF AUTHORITY
[Sections 983.058-983.100 reserved for expansion]
SUBCHAPTER C. EFFECT OF REDOMESTICATION
Sec. 983.101. CONTINUATION OF BUSINESS
Sec. 983.102. EFFECT ON ADMITTED ASSETS
CHAPTER 983. REDOMESTICATION OF
INSURERS AND HEALTH MAINTENANCE ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 983.001. DEFINITION. In this chapter, "redomestication" means a change in domicile of an insurer or health maintenance organization by merger, consolidation, or another legal method. (V.T.I.C. Art. 1.38, Secs. (c) (part), (d) (part).)
Sec. 983.002. RULES. The commissioner may adopt rules as necessary to implement this chapter. (V.T.I.C. Art. 1.38, Sec. (g).)
[Sections 983.003-983.050 reserved for expansion]
SUBCHAPTER B. REDOMESTICATION PROCESS
Sec. 983.051. REDOMESTICATION: FOREIGN TO DOMESTIC. (a) An insurer or health maintenance organization that is organized under the laws of another state and authorized to write insurance or provide a health care plan in this state may redomesticate to this state if:
(1) the entity amends or restates its articles of incorporation to comply with each requirement of this code relating to the organization and authorization of a domestic entity of the same type; and
(2) the commissioner approves the redomestication.
(b) An insurer or health maintenance organization that redomesticates under this section is:
(1) considered to be domiciled in this state; and
(2) entitled to a certificate of authority to engage in the business of insurance or the business of a health maintenance organization in this state as a domestic insurer or health maintenance organization, as applicable, without interruption of its authority to engage in business in this state. (V.T.I.C. Art. 1.38, Sec. (a).)
Sec. 983.052. REDOMESTICATION: DOMESTIC TO FOREIGN. (a) An insurer or health maintenance organization that is organized under the laws of this state and authorized to write insurance or provide a health care plan in another state may redomesticate to that other state if the commissioner and the supervising regulatory official of the proposed state of domicile approve the redomestication.
(b) On the effective date of redomestication, the entity:
(1) ceases to be a domestic insurer or health maintenance organization, as applicable; and
(2) is a qualified foreign insurer or health maintenance organization, as applicable, in this state without interruption of its authority to engage in the business of insurance or the business of a health maintenance organization in this state.
(c) The commissioner may approve a proposed redomestication under this section unless the commissioner determines that:
(1) the proposed redomestication would not be in the interest of this state's policyholders or enrollees; or
(2) the entity cannot qualify for a certificate of authority in this state as a foreign insurer or health maintenance organization, as applicable. (V.T.I.C. Art. 1.38, Sec. (b).)
Sec. 983.053. REDOMESTICATION: FOREIGN TO FOREIGN. (a) An insurer or health maintenance organization that is organized under the laws of another state and authorized to engage in the business of insurance or the business of a health maintenance organization in this state may redomesticate to another foreign state without interruption of its authority to engage in business in this state as a foreign insurer or health maintenance organization, as applicable, if:
(1) the entity:
(A) amends or restates its articles of incorporation as required by law; and
(B) provides proper notice to the commissioner; and
(2) the commissioner:
(A) determines that:
(i) the proposed redomestication would not, on the effective date of redomestication, result in a reduction in the amount of the entity's capital or surplus below the amount required for authorization as a foreign insurer or health maintenance organization, as applicable;
(ii) there would not be a material change in the lines of insurance to be written or health care plan provided by the entity;
(iii) the proposed redomestication has been approved by the supervising regulatory officials of both the current and proposed state of domicile;
(iv) the proposed redomestication would not be detrimental to the interest of the insurer's policyholders or the health maintenance organization's enrollees in this state; and
(v) the proposed redomestication is not related to a change in the control of the entity, unless the commissioner has given prior approval to the change in control; and
(B) approves the redomestication.
(b) Subsection (a)(2)(A)(v) does not apply if the redomesticating insurer or health maintenance organization is to become a parent, subsidiary, or affiliate of a qualified insurer or health maintenance organization, as applicable, that has held a certificate of authority in this state for at least seven years before the date of the redomestication. (V.T.I.C. Art. 1.38, Sec. (c) (part).)
Sec. 983.054. NOTICE AND FILING REQUIRED. An insurer or health maintenance organization shall:
(1) notify the commissioner of the details of a proposed redomestication; and
(2) promptly file with the commissioner any amendments to its corporate documents filed or required to be filed with the commissioner. (V.T.I.C. Art. 1.38, Sec. (f) (part).)
Sec. 983.055. FORMS OF INSURANCE POLICY OR EVIDENCE OF COVERAGE. (a) A redomesticated insurer or health maintenance organization shall file with the commissioner a new insurance policy or evidence of coverage form, or an endorsement to an approved policy or evidence of coverage form, that implements the redomestication.
(b) The insurer or health maintenance organization, under conditions approved by the commissioner and with an appropriate endorsement, may use an insurance policy or evidence of coverage form approved before the redomestication. (V.T.I.C. Art. 1.38, Sec. (d) (part).)
Sec. 983.056. OUTSTANDING INSURANCE POLICY OR EVIDENCE OF COVERAGE: CHANGE OF NAME. A redomesticating insurer or health maintenance organization that changes its name shall endorse each outstanding insurance policy or evidence of coverage with the new name. (V.T.I.C. Art. 1.38, Sec. (d) (part).)
Sec. 983.057. ISSUANCE OF AMENDED CERTIFICATE OF AUTHORITY. The commissioner shall issue an amended certificate of authority on approval of a redomestication. (V.T.I.C. Art. 1.38, Sec. (f) (part).)
[Sections 983.058-983.100 reserved for expansion]
SUBCHAPTER C. EFFECT OF REDOMESTICATION
Sec. 983.101. CONTINUATION OF BUSINESS. (a) If a redomesticating insurer or health maintenance organization remains qualified to engage in the business of insurance or the business of a health maintenance organization in this state, the following continue in effect after redomestication:
(1) the approved agents' appointments and licenses;
(2) the approved insurance policy forms and provider contracts;
(3) the authorized premium rates;
(4) the quality of care certificates; and
(5) any other relevant item that exists on the effective date of the redomestication.
(b) Each outstanding insurance policy, evidence of coverage, provider contract, or quality of care certificate of a redomesticating insurer or health maintenance organization continues in effect after redomestication. (V.T.I.C. Art. 1.38, Sec. (d) (part).)
Sec. 983.102. EFFECT ON ADMITTED ASSETS. Except as provided by other law, the admitted assets of a redomesticating insurer or health maintenance organization that qualify, on the effective date of the redomestication, as admitted assets under this code continue to qualify as admitted assets after the redomestication. (V.T.I.C. Art. 1.38, Sec. (e).)
CHAPTER 984. MEXICAN CASUALTY INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 984.001. AUTHORITY OF MEXICAN CASUALTY INSURANCE
COMPANIES
Sec. 984.002. AUTHORIZED AGENT REQUIRED
[Sections 984.003-984.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 984.051. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 984.052. APPLICATION
[Sections 984.053-984.100 reserved for expansion]
SUBCHAPTER C. DEPOSIT WITH COMPTROLLER
Sec. 984.101. DEPOSIT WITH COMPTROLLER REQUIRED
Sec. 984.102. PAYMENTS FROM DEPOSIT
Sec. 984.103. RETURN OF DEPOSIT
[Sections 984.104-984.150 reserved for expansion]
SUBCHAPTER D. TAXES AND CHARGES; REPORTS
Sec. 984.151. PREMIUM TAX
Sec. 984.152. OTHER TAXES AND CHARGES
Sec. 984.153. REPORTS
[Sections 984.154-984.200 reserved for expansion]
SUBCHAPTER E. REGULATION AND ENFORCEMENT
Sec. 984.201. AGREEMENT TO COMPLY WITH CHAPTER
Sec. 984.202. ANNUAL STATEMENT
Sec. 984.203. AUTHORITY TO CONDUCT EXAMINATION
Sec. 984.204. AUTHORITY TO REVOKE OR SUSPEND CERTIFICATE
OF AUTHORITY
CHAPTER 984. MEXICAN CASUALTY INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 984.001. AUTHORITY OF MEXICAN CASUALTY INSURANCE COMPANIES. (a) An insurance company that complies with this chapter may issue an insurance policy described by Subsection (b) as a Mexican casualty insurance company if the company is:
(1) organized under the laws of the United Mexican States or any state of that nation; and
(2) authorized by those laws, the company's charter or articles of association, and a license issued by the appropriate insurance regulatory authority of the United Mexican States or any state of that nation to write insurance policies described by Subsection (b).
(b) A Mexican casualty insurance company described by Subsection (a) may issue in this state an insurance policy only if the policy:
(1) provides automobile coverage or accident or other casualty insurance coverage on a person or personal property; and
(2) is in effect only while the person or property covered by the policy is within the boundaries of the United Mexican States. (V.T.I.C. Art. 8.24 (intro) (part).)
Sec. 984.002. AUTHORIZED AGENT REQUIRED. (a) A Mexican casualty insurance company may engage in the business of insurance in this state only through a resident agent in this state who:
(1) has the company's written authorization to engage in the business of insurance for the company; and
(2) is licensed by the department under Article 21.14.
(b) The agent's license must specifically authorize the agent to write for Mexican casualty insurance companies insurance coverage authorized by this chapter. (V.T.I.C. Art. 8.24, Subsec. (h).)
[Sections 984.003-984.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 984.051. CERTIFICATE OF AUTHORITY REQUIRED. A Mexican casualty insurance company must hold a certificate of authority to engage in the business of insurance under this chapter. (V.T.I.C. Art. 8.24 (intro) (part).)
Sec. 984.052. APPLICATION. (a) To issue insurance policies under this chapter, a Mexican casualty insurance company must file with the department an application for a certificate of authority under this chapter.
(b) The application must be:
(1) in writing;
(2) accompanied by a correct English translation of the company's charter and bylaws; and
(3) certified by:
(A) two of the company's principal officers; and
(B) the insurance regulatory officials under whose supervision the company operates in the United Mexican States.
(c) Before the department issues a certificate of authority under this chapter to a Mexican casualty insurance company, the company must file with the department:
(1) a photostatic copy of any license held by the company to engage in the business of insurance in the United Mexican States;
(2) a copy of the company's most recent financial reports or statements; and
(3) a copy of the most recent examination reports of the company's affairs and financial condition by the insurance regulatory authorities under which the company operates in the United Mexican States. (V.T.I.C. Art. 8.24, Subsecs. (a), (b) (part).)
[Sections 984.053-984.100 reserved for expansion]
SUBCHAPTER C. DEPOSIT WITH COMPTROLLER
Sec. 984.101. DEPOSIT WITH COMPTROLLER REQUIRED. (a) A Mexican casualty insurance company shall deposit with the comptroller at least $25,000 in:
(1) United States currency; or
(2) securities that are:
(A) eligible for other casualty insurance companies authorized to engage in the business of insurance in this state; and
(B) approved by the commissioner.
(b) The deposit shall be used to pay any lawful claim or final judgment against the company, including any claim or judgment for tax due to this state and any policy claim or other debt or obligation incurred in the course of the company's operations as provided by this chapter.
(c) The company shall periodically deposit additional currency or securities described by Subsection (a) as necessary to maintain a minimum total deposit of $25,000. (V.T.I.C. Art. 8.24, Subsec. (c) (part).)
Sec. 984.102. PAYMENTS FROM DEPOSIT. On approval of the commissioner, the comptroller shall pay from the deposit required under this subchapter any unsatisfied final judgment obtained against the Mexican casualty insurance company in a court of this state based on substituted service as authorized by Chapter 804. (V.T.I.C. Art. 8.24, Subsec. (d).)
Sec. 984.103. RETURN OF DEPOSIT. With the approval of the commissioner, the comptroller shall return the deposit required under this subchapter, or the unencumbered balance of the deposit, to the Mexican casualty insurance company on:
(1) the company's withdrawal from the business of insurance in this state; and
(2) a showing to the department that:
(A) each policy written by the company in this state has expired or been canceled; and
(B) each claim or obligation of the company on a policy written in this state that constitutes a lawful charge against the deposit has been satisfied. (V.T.I.C. Art. 8.24, Subsec. (c) (part).)
[Sections 984.104-984.150 reserved for expansion]
SUBCHAPTER D. TAXES AND CHARGES; REPORTS
Sec. 984.151. PREMIUM TAX. (a) A Mexican casualty insurance company shall pay to this state an annual premium tax based solely on the company's gross premium receipts from insurance policies issued by the company in this state that cover resident citizens of this state or property or risks principally domiciled or located in this state, as shown by reports made to the department each year.
(b) The company shall pay the tax at the same percentage rate and in the same manner that is required of other insurance companies authorized to write accident and casualty coverage in this state. (V.T.I.C. Art. 8.24, Subsec. (e) (part).)
Sec. 984.152. OTHER TAXES AND CHARGES. In addition to paying a premium tax as required by Section 984.151, a Mexican casualty insurance company shall pay any other maintenance fee, charge, or tax that is required of other insurance companies authorized to write accident and casualty coverage in this state on the same basis as is required of those companies. (V.T.I.C. Art. 8.24, Subsec. (e) (part).)
Sec. 984.153. REPORTS. A Mexican casualty insurance company shall make the same reports that other insurance companies authorized to write accident and casualty coverage in this state are required to make. The company shall make the reports on forms adopted by the commissioner. (V.T.I.C. Art. 8.24, Subsec. (e) (part).)
[Sections 984.154-984.200 reserved for expansion]
SUBCHAPTER E. REGULATION AND ENFORCEMENT
Sec. 984.201. AGREEMENT TO COMPLY WITH CHAPTER. A Mexican casualty insurance company shall file in English a document executed by the company's officials expressly accepting the terms of this chapter and agreeing that the department may revoke, suspend, or refuse to grant or renew a certificate of authority under this chapter on a determination by the commissioner that the company:
(1) is insolvent or in hazardous financial condition; or
(2) has violated an applicable law of this state or of the company's home jurisdiction. (V.T.I.C. Art. 8.24, Subsec. (g).)
Sec. 984.202. ANNUAL STATEMENT. A Mexican casualty insurance company shall file annually with the department each of the items listed in Section 984.052(c). (V.T.I.C. Art. 8.24, Subsec. (b) (part).)
Sec. 984.203. AUTHORITY TO CONDUCT EXAMINATION. The department may examine at any time the affairs and condition and any books or records of a Mexican casualty insurance company, at the company's expense, to determine the company's:
(1) financial condition and solvency; and
(2) compliance with the applicable laws of this state and of the company's home jurisdiction. (V.T.I.C. Art. 8.24, Subsec. (f).)
Sec. 984.204. AUTHORITY TO REVOKE OR SUSPEND CERTIFICATE OF AUTHORITY. The commissioner may revoke or suspend a Mexican casualty insurance company's certificate of authority under this chapter if the commissioner, after notice and an opportunity for a hearing, determines that the company, with neglect and wilful disregard, systematically failed to comply with obligations derived from insurance policies issued in this state and the laws applicable to those policies. (V.T.I.C. Art. 8.24, Subsec. (i) (part).)
SECTION . TITLE 7, INSURANCE CODE. The Insurance Code is amended by adding Title 7 to read as follows:
TITLE 7. LIFE INSURANCE AND ANNUITIES
SUBTITLE A. LIFE INSURANCE IN GENERAL
CHAPTER 1101. LIFE INSURANCE
CHAPTER 1102. PAYMENT OF INSURANCE BENEFITS IN CURRENCY
CHAPTER 1103. LIFE INSURANCE POLICY BENEFICIARIES
CHAPTER 1104. LIFE INSURANCE AND ANNUITY CONTRACTS ISSUED
TO CERTAIN PERSONS
CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE
CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE
POLICIES
CHAPTER 1107. STANDARD NONFORFEITURE LAW FOR CERTAIN
ANNUITIES
CHAPTER 1108. BENEFITS EXEMPT FROM SEIZURE
CHAPTER 1109. UNCLAIMED LIFE INSURANCE AND ANNUITY CONTRACT
PROCEEDS
CHAPTER 1110. INTEREST RATES ON LIFE INSURANCE POLICY LOANS
CHAPTER 1111. LIFE AND VIATICAL SETTLEMENTS AND
ACCELERATED TERM LIFE INSURANCE BENEFITS
[Chapters 1112-1130 reserved for expansion]
SUBTITLE B. GROUP LIFE INSURANCE
CHAPTER 1131. GROUP LIFE INSURANCE AND FRANCHISE LIFE
INSURANCE
CHAPTER 1132. NOTICE OF RATE INCREASE FOR GROUP LIFE
INSURANCE
[Chapters 1133-1150 reserved for expansion]
SUBTITLE C. SPECIALIZED COVERAGES
CHAPTER 1151. INDUSTRIAL LIFE INSURANCE
CHAPTER 1152. SEPARATE ACCOUNTS, VARIABLE CONTRACTS, AND
RELATED PRODUCTS
CHAPTER 1153. CREDIT LIFE INSURANCE AND CREDIT ACCIDENT
AND HEALTH INSURANCE
TITLE 7. LIFE INSURANCE AND ANNUITIES
SUBTITLE A. LIFE INSURANCE IN GENERAL
CHAPTER 1101. LIFE INSURANCE
SUBCHAPTER A. REQUIRED POLICY PROVISIONS
Sec. 1101.001. APPLICABILITY OF SUBCHAPTER
Sec. 1101.002. POLICY PROVISIONS REQUIRED
Sec. 1101.003. ENTIRE CONTRACT
Sec. 1101.004. PREMIUMS PAYABLE IN ADVANCE
Sec. 1101.005. GRACE PERIOD
Sec. 1101.006. INCONTESTABILITY
Sec. 1101.007. STATEMENTS OF INSURED
Sec. 1101.008. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF
INSURED IS UNDERSTATED
Sec. 1101.009. POLICY LOANS
Sec. 1101.010. NONFORFEITURE BENEFITS AND CASH SURRENDER
VALUES IN GENERAL
Sec. 1101.011. TIME FOR SETTLEMENT OF CLAIM
Sec. 1101.012. TABLE OF INSTALLMENTS
OF PROCEEDS
Sec. 1101.013. STATEMENT OF MAXIMUM AMOUNT PAYABLE UNDER
FAMILY GROUP LIFE INSURANCE POLICY
[Sections 1101.014-1101.050 reserved for expansion]
SUBCHAPTER B. PROHIBITED POLICY PROVISIONS
Sec. 1101.051. APPLICABILITY OF SUBCHAPTER
Sec. 1101.052. EXCLUSION
Sec. 1101.053. CERTAIN LIMITATIONS PERIODS
Sec. 1101.054. RETROACTIVE ISSUANCE OR EFFECT;
EXCHANGE OR CONVERSION
Sec. 1101.055. SETTLEMENT ON MATURITY LESS THAN FACE VALUE
Sec. 1101.056. PRELIMINARY TERM INSURANCE OF MORE THAN
ONE YEAR IN LEVEL PREMIUM POLICY
[Sections 1101.057-1101.100 reserved for expansion]
SUBCHAPTER C. POLICY PROVISIONS REQUIRED BY OTHER
JURISDICTIONS
Sec. 1101.101. REQUIRED POLICY PROVISIONS
[Sections 1101.102-1101.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER
POLICIES
Sec. 1101.151. APPLICABILITY OF SUBCHAPTER
Sec. 1101.152. STIPULATED FORM OF INSURANCE
Sec. 1101.153. COMPUTATION OF NET VALUE OF STIPULATED
FORM OF INSURANCE
Sec. 1101.154. SURRENDER OF POLICY FOR SPECIFIED CASH
SURRENDER VALUE
Sec. 1101.155. CASH VALUE TABLE
Sec. 1101.156. PURCHASE OF OTHER INSURANCE AND
REINSTATEMENT
CHAPTER 1101. LIFE INSURANCE
SUBCHAPTER A. REQUIRED POLICY PROVISIONS
Sec. 1101.001. APPLICABILITY OF SUBCHAPTER. This subchapter applies to a life insurance policy:
(1) issued or delivered in this state; or
(2) issued by a life insurance company organized under the laws of this state. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.002. POLICY PROVISIONS REQUIRED. (a) Except as provided by this section, a life insurance policy must contain provisions that are substantially the same as the provisions required by this subchapter.
(b) A single premium life insurance policy is not required to contain a provision under this subchapter to the extent that the provision is not applicable to a single premium insurance policy. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.003. ENTIRE CONTRACT. (a) A life insurance policy constitutes the entire contract between the parties, except that if the application is made a part of the contract, the policy and the application constitute the entire contract.
(b) A life insurance policy must provide that the policy or the policy and the application for the policy constitute the entire contract between the parties. (V.T.I.C. Arts. 3.44 (part); 21.24.)
Sec. 1101.004. PREMIUMS PAYABLE IN ADVANCE. A life insurance policy must provide that all premiums are payable in advance at the home office of the company that issues the policy or to an agent of the company on delivery of a receipt signed by at least one of the company officers designated in the policy. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.005. GRACE PERIOD. (a) Except as provided by Subsection (b), a life insurance policy:
(1) must contain a provision for a grace period of at least one month for the payment of each premium after the first payment during which the policy remains in force; and
(2) may:
(A) provide for an interest charge on a premium paid during a grace period; or
(B) provide that if an insured dies during a grace period the overdue premium will be deducted from any settlement made under the policy.
(b) The commissioner by rule may require a life insurance policy issued under Section 884.402(3) to contain a grace period that is longer than the grace period required by this section. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.006. INCONTESTABILITY. (a) Except as provided by Subsection (b), a life insurance policy must provide that a policy in force for two years during the lifetime of the insured is incontestible, except for nonpayment of premiums.
(b) At the option of the company, a life insurance policy may provide that the policy may be contested at any time for violation of policy conditions relating to naval and military service in a time of war. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.007. STATEMENTS OF INSURED. A life insurance policy must provide that, in the absence of fraud, a statement made by an insured is considered a representation and not a warranty. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.008. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF INSURED IS UNDERSTATED. A life insurance policy must provide that if the age of an insured has been understated, the amount payable under the policy is the amount that the premium paid would have purchased if the insured's age had been stated correctly. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.009. POLICY LOANS. (a) This section does not apply to:
(1) a term life insurance policy;
(2) a pure endowment contract issued or granted:
(A) as an original contract; or
(B) in exchange for a lapsed or surrendered policy; or
(3) a policy that does not provide for cash values or nonforfeiture values and that meets the requirements of Section 884.403(b).
(b) A life insurance policy must provide that the company that issues the policy will loan to the policy owner at a specified interest rate an amount equal to the sum of the policy's cash value and any dividend additions to the policy, or, at the policy owner's option, an amount less than that sum, if:
(1) the policy is in force;
(2) the premiums for the policy have been paid for at least three full years; and
(3) the policy is properly assigned.
(c) A life insurance policy must also provide that:
(1) a policy loan is secured only by the policy;
(2) the company may deduct from a policy loan the sum of the amount of existing debt on the policy and the balance of unpaid premiums for the current policy year;
(3) the company may collect in advance interest on the policy loan to the end of the current policy year; and
(4) failure to repay the policy loan or interest on the loan does not void the policy until the total amount owed under the loan equals or exceeds the policy's cash value.
(d) A life insurance policy may provide that a policy loan may be deferred for a period not to exceed six months after the date the application for the loan is made.
(e) A life insurance policy may not require a prerequisite to a policy loan if the prerequisite is not required or authorized by this section. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.010. NONFORFEITURE BENEFITS AND CASH SURRENDER VALUES IN GENERAL. (a) A life insurance policy must provide nonforfeiture benefits, including cash surrender values, in accordance with:
(1) Subchapter E; or
(2) Chapter 1105, for a policy issued on or after the date determined under Section 1105.002(a) or (b), as applicable.
(b) This section does not apply to a term life insurance policy. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.011. TIME FOR SETTLEMENT OF CLAIM. A life insurance policy must provide that settlement under the policy after the death of the insured will be made not later than two months after the date of receipt of proof of:
(1) the death; and
(2) the right of the claimant to the proceeds of the policy. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.012. TABLE OF INSTALLMENTS OF PROCEEDS. A life insurance policy that provides that the policy proceeds are payable in installments must include a table that shows the amount of the installments. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.013. STATEMENT OF MAXIMUM AMOUNT PAYABLE UNDER FAMILY GROUP LIFE INSURANCE POLICY. A family group life insurance policy must clearly state:
(1) the maximum amount that is payable to the payee in the policy on the death of an insured or insureds; and
(2) any terms under which an amount other than the maximum amount of the policy is payable. (V.T.I.C. Art. 3.44 (part).)
[Sections 1101.014-1101.050 reserved for expansion]
SUBCHAPTER B. PROHIBITED POLICY PROVISIONS
Sec. 1101.051. APPLICABILITY OF SUBCHAPTER. Unless otherwise provided by this subchapter, this subchapter applies to a life insurance policy:
(1) issued or delivered in this state; or
(2) issued by a life insurance company organized in this state. (V.T.I.C. Art. 3.45 (part).)
Sec. 1101.052. EXCLUSION. Unless otherwise provided by this subchapter, this subchapter does not apply to a policy issued instead of or in exchange for a policy issued before July 10, 1909. (V.T.I.C. Art. 3.45 (part).)
Sec. 1101.053. CERTAIN LIMITATIONS PERIODS. A life insurance policy may not include a provision that limits the time during which an action under the policy may be commenced to a period of less than two years after the date the cause of action accrues. (V.T.I.C. Art. 3.45 (part).)
Sec. 1101.054. RETROACTIVE ISSUANCE OR EFFECT; EXCHANGE OR CONVERSION. (a) Except as provided by Subsection (b), a life insurance policy may not contain a provision under which the policy is issued or takes effect on a date more than six months before the date of the original policy application if the provision causes the insured to rate at an age that is younger than the age of the insured on the date of the application. For the purposes of this subsection, the age of the insured on the date of the application is the age of the insured on the birthday of the insured that is nearest to the date of the application.
(b) An issuer of a life insurance policy or an endowment or annuity contract may, with the consent of the policyholder or contract holder, exchange the policy or contract for, or convert the policy or contract into, a policy of another plan of insurance or an endowment or annuity contract as of a date not earlier than the effective date of the original policy or contract.
(c) If an exchange or conversion is made under Subsection (b) and the newly written policy or contract is issued as of a date earlier than the date of the application for exchange or conversion, the amount of insurance, endowment, or annuity provided under the newly written policy or contract may not exceed the greater of:
(1) the amount that the premium paid for the original policy or contract would have purchased on the plan of the newly written policy or contract for an individual the age of the insured on the effective date of the original policy or contract; or
(2) the amount of the original policy or contract. (V.T.I.C. Art. 3.45 (part).)
Sec. 1101.055. SETTLEMENT ON MATURITY LESS THAN FACE VALUE. (a) Except as provided by Subsection (b), a life insurance policy may not contain a provision for a settlement at maturity that is less than the amount insured on the face of the policy plus the amount of any dividend additions to the policy minus the sum of the amount of any debt to the company that issues the policy and the amount of any premium that may be deducted from the settlement under the terms of the policy.
(b) A life insurance policy may provide for a settlement that will be less than the amount required under Subsection (a) if the death of the insured is:
(1) by the insured's own hand regardless of whether the insured is sane or insane;
(2) caused by following a hazardous occupation that is stated in the policy; or
(3) the result of aviation activities under conditions specified in the policy and approved by the commissioner under Subchapter A. (V.T.I.C. Art. 3.45 (part).)
Sec. 1101.056. PRELIMINARY TERM INSURANCE OF MORE THAN ONE YEAR IN LEVEL PREMIUM POLICY. (a) Sections 1101.051 and 1101.052 do not apply to this section.
(b) This section does not apply to a life insurance policy issued on or after the date determined under Section 1105.002(a) or (b), as applicable.
(c) A level premium life insurance policy may not be issued or sold in this state by any company if the policy provides for more than one year of preliminary term insurance. (V.T.I.C. Art. 3.46.)
[Sections 1101.057-1101.100 reserved for expansion]
SUBCHAPTER C. POLICY PROVISIONS REQUIRED BY OTHER
JURISDICTIONS
Sec. 1101.101. REQUIRED POLICY PROVISIONS. (a) A policy issued in this state by a life insurance company not organized under the laws of this state may contain any provision that the law of the state, territory, district, or county under which the company is organized requires the policy to contain.
(b) Notwithstanding Subchapter A, a policy issued or delivered in another state, territory, district, or county by a life insurance company organized under the laws of this state may contain any provision required by the laws of that state, territory, district, or county. (V.T.I.C. Art. 3.47.)
[Sections 1101.102-1101.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER
POLICIES
Sec. 1101.151. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a life insurance policy issued before a date described by Section 1101.010(a)(2). (New.)
Sec. 1101.152. STIPULATED FORM OF INSURANCE. In case of a default in the payment of a premium after premiums have been paid for three years, a life insurance policy to which this subchapter applies must contain a provision that secures a stipulated form of insurance on the life of the insured. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.153. COMPUTATION OF NET VALUE OF STIPULATED FORM OF INSURANCE. (a) Except as provided by Subsection (c), the net value of a life insurance policy secured under Section 1101.152 must be equal to the amount of the reserve on the policy for which premium payment is in default and on any dividend additions to that policy on the date of default, less the sum of:
(1) not more than two and one-half percent of the amount insured under the policy and any existing dividend additions to the policy; and
(2) the amount of any existing indebtedness to the company on the policy.
(b) The reserve described by Subsection (a) excludes any reserve for disability or accidental death benefits.
(c) The net value of a life insurance policy that is secured under Section 1101.152 for a policy other than an industrial life insurance policy and that is issued to insure the life of a woman may be computed using an age not more than three years younger than the actual age of the insured if the policy uses the same age differential to compute the policy reserve.
(d) Except as provided by Subsection (e), the amount of the policy reserve under Subsection (a) must be computed according to the mortality table, interest rate, and method adopted in the policy for computing the reserve.
(e) In computing the value of paid-up term insurance with any accompanying pure endowment, a rate of mortality may be assumed that is not more than:
(1) 130 percent of the rate of mortality according to the applicable table, or, for a substandard policy, the adopted multiple of that mortality rate, if the American Men Ultimate Table of Mortality or the Commissioners 1941 Standard Ordinary Mortality Table is adopted for computing the reserve; or
(2) the rate of mortality shown by the Commissioners 1958 Extended Term Insurance Table, or, for a substandard policy, the adopted multiple of that mortality rate, if the Commissioners 1958 Standard Ordinary Mortality Table is adopted for computing the reserve.
(f) Subject to Subsection (g), a life insurance policy must state:
(1) the amount and term of the insurance to be secured in accordance with Section 1101.152 computed as if there were no indebtedness on the policy and no dividend additions to the policy; and
(2) the mortality table, interest rate, method, and, if the policy is issued to insure the life of a woman, any age differential, that will be used to compute the policy reserve.
(g) A mortality table, interest rate, method, or age differential stated under Subsection (f) must be authorized by law to compute the reserve liability on the policy. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.154. SURRENDER OF POLICY FOR SPECIFIED CASH SURRENDER VALUE. (a) A life insurance policy to which this subchapter applies must:
(1) provide within one month after a due date for a premium, after premiums have been paid for three years, the policy may be surrendered to the company that issues the policy at the company's home office in return for an amount equal to the cash value of the policy; and
(2) specify the cash value of the policy, which, subject to Subsection (b), may not be less than the amount that would otherwise be available to secure insurance in accordance with Section 1101.152.
(b) The cash value of the policy may not exceed the amount of the policy reserve.
(c) The policy may provide that the company that issues the policy may defer payment of the cash value of the policy for a period not to exceed six months after the date of application for the payment. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.155. CASH VALUE TABLE. A life insurance policy to which this subchapter applies must include a table that shows in dollar amounts the cash value of the policy and the options available to the policy owner if the owner defaults in premium payments during each of the first 20 years that the policy will be in force or each of the years during which premiums are payable, beginning with the first year in which the cash values and options are available. (V.T.I.C. Art. 3.44 (part).)
Sec. 1101.156. PURCHASE OF OTHER INSURANCE AND REINSTATEMENT. A life insurance policy to which this subchapter applies must provide that if there is a default in premium payments and the value of the policy is applied to the purchase of other insurance that the original life insurance policy may be reinstated within three years after the date of default if:
(1) other insurance purchased with the value of the original life insurance policy remains in force;
(2) the original life insurance policy has not been surrendered to the company and canceled;
(3) the company receives evidence of insurability that is satisfactory to the company; and
(4) the arrears of premiums are paid with interest. (V.T.I.C. Art. 3.44 (part).)
CHAPTER 1102. PAYMENT OF INSURANCE BENEFITS
IN CURRENCY
Sec. 1102.001. DEFINITIONS
Sec. 1102.002. BENEFITS PAYABLE IN CURRENCY
Sec. 1102.003. STATEMENT REGARDING VALUE OF FOREIGN
CURRENCY
Sec. 1102.004. PREVIOUSLY APPROVED INSURANCE POLICY FORM
PAYABLE IN FOREIGN CURRENCY
Sec. 1102.005. RULES
CHAPTER 1102. PAYMENT OF INSURANCE BENEFITS
IN CURRENCY
Sec. 1102.001. DEFINITIONS. In this chapter:
(1) "Insurance policy" means a policy, certificate, or contract of:
(A) life, term, or endowment insurance, including an annuity or pure endowment contract;
(B) group life or term insurance, including a group annuity contract;
(C) industrial life insurance;
(D) accident or health insurance;
(E) group accident or health insurance;
(F) hospitalization insurance;
(G) group hospitalization insurance;
(H) medical or surgical insurance;
(I) group medical or surgical insurance; or
(J) fraternal benefit insurance.
(2) "Insurer" means any insurer, including a:
(A) life, accident, health, or casualty insurance company;
(B) mutual life insurance company;
(C) mutual insurance company other than a life insurance company;
(D) mutual or natural premium life insurance company;
(E) general casualty company;
(F) Lloyd's plan or a reciprocal or interinsurance exchange;
(G) fraternal benefit society; or
(H) group hospital service corporation. (V.T.I.C. Art. 3.42A, Sec. (a) (part).)
Sec. 1102.002. BENEFITS PAYABLE IN CURRENCY. Each benefit payable under an insurance policy delivered, issued, or used in this state by an insurer shall be payable in currency. (V.T.I.C. Art. 3.42A, Sec. (a) (part).)
Sec. 1102.003. STATEMENT REGARDING VALUE OF FOREIGN CURRENCY. (a) An insurance policy described by Section 1102.002 providing that benefits are payable in foreign currency must include a conspicuous statement that the value of the currency denominated in the policy can fluctuate as compared to the value of United States currency.
(b) The statement must be:
(1) included as part of the policy; or
(2) attached to the insurance policy at the time it is issued. (V.T.I.C. Art. 3.42A, Sec. (c).)
Sec. 1102.004. PREVIOUSLY APPROVED INSURANCE POLICY FORM PAYABLE IN FOREIGN CURRENCY. (a) The commissioner may disapprove or withdraw approval of a previously approved insurance policy form that provides benefits payable in foreign currency if the commissioner determines that the foreign currency has been less stable than United States currency in the previous 20-year period.
(b) This section does not require the resubmission for approval of any previously approved insurance policy form unless:
(1) withdrawal of approval is authorized under this section or Article 3.42; or
(2) after notice and hearing, the commissioner determines that approval was obtained by improper means, including by misrepresentation, fraud, or a misleading statement or document. (V.T.I.C. Art. 3.42A, Sec. (b).)
Sec. 1102.005. RULES. The commissioner may adopt reasonable rules to accomplish the purposes of this chapter, including rules requiring:
(1) appropriate reserves for insurance policies subject to this chapter; or
(2) prudent investment of premiums collected from insurance policies subject to this chapter regardless of any other provision of this code related to the investment of money by an insurance company. (V.T.I.C. Art. 3.42A, Sec. (d).)
CHAPTER 1103. LIFE INSURANCE POLICY BENEFICIARIES
SUBCHAPTER A. STATUTORY LIFE INSURANCE BENEFICIARIES;
INSURABLE INTEREST
Sec. 1103.001. APPLICABILITY OF SUBCHAPTER
Sec. 1103.002. INSURABLE INTEREST OF BENEFICIARY
Sec. 1103.003. CORPORATION, JOINT STOCK ASSOCIATION,
OR TRUST ESTATE AS BENEFICIARY
Sec. 1103.004. PARTNERSHIP OR PARTNER AS BENEFICIARY
Sec. 1103.005. RELIGIOUS, EDUCATIONAL, ELEEMOSYNARY,
CHARITABLE, OR BENEVOLENT INSTITUTION OR
UNDERTAKING AS BENEFICIARY
[Sections 1103.006-1103.050 reserved for expansion]
SUBCHAPTER B. DESIGNATION OF BENEFICIARY OR OWNER OF LIFE
INSURANCE POLICY; INSURABLE INTEREST
Sec. 1103.051. APPLICABILITY OF SUBCHAPTER
Sec. 1103.052. LIBERAL CONSTRUCTION
Sec. 1103.053. INSURABLE INTEREST OF BENEFICIARY,
OWNER, TRANSFEREE, OR ASSIGNEE
Sec. 1103.054. DESIGNATION OF BENEFICIARY OR OWNER
IN POLICY APPLICATION
Sec. 1103.055. DESIGNATION OF BENEFICIARY OF
POLICY; TRANSFER OR ASSIGNMENT OF POLICY
OR INTEREST
Sec. 1103.056. PURCHASE OF OR APPLICATION FOR POLICY
BY THIRD PARTY
[Sections 1103.057-1103.100 reserved for expansion]
SUBCHAPTER C. PAYMENT OF PROCEEDS
Sec. 1103.101. APPLICABILITY OF SUBCHAPTER
Sec. 1103.102. PAYMENT TO DESIGNATED BENEFICIARY
Sec. 1103.103. DISCHARGE OF LIABILITY
Sec. 1103.104. INTEREST ON PROCEEDS
[Sections 1103.105-1103.150 reserved for expansion]
SUBCHAPTER D. FORFEITURE OF BENEFICIARY'S RIGHTS
Sec. 1103.151. FORFEITURE
Sec. 1103.152. PAYMENT OF PROCEEDS TO CONTINGENT BENEFICIARY
OR TO RELATIVE
CHAPTER 1103. LIFE INSURANCE POLICY BENEFICIARIES
SUBCHAPTER A. STATUTORY LIFE INSURANCE BENEFICIARIES;
INSURABLE INTEREST
Sec. 1103.001. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a life insurance policy issued by a legal reserve life insurance company. (V.T.I.C. Art. 3.49 (part).)
Sec. 1103.002. INSURABLE INTEREST OF BENEFICIARY. A beneficiary described by this subchapter who is designated in a life insurance policy has an insurable interest for the face amount of the policy and is entitled to collect that amount. (V.T.I.C. Art. 3.49 (part).)
Sec. 1103.003. CORPORATION, JOINT STOCK ASSOCIATION, OR TRUST ESTATE AS BENEFICIARY. A corporation, a joint stock association, or a trust estate that is engaging in business for profit may be designated as a beneficiary in a policy that insures the life of an officer or stockholder of the corporation, joint stock association, or trust estate. (V.T.I.C. Art. 3.49 (part).)
Sec. 1103.004. PARTNERSHIP OR PARTNER AS BENEFICIARY. A partnership or a member of a partnership may be designated as a beneficiary in a policy that insures the life of a member of the partnership. (V.T.I.C. Art. 3.49 (part).)
Sec. 1103.005. RELIGIOUS, EDUCATIONAL, ELEEMOSYNARY, CHARITABLE, OR BENEVOLENT INSTITUTION OR UNDERTAKING AS BENEFICIARY. A religious, educational, eleemosynary, charitable, or benevolent institution or undertaking may be designated as a beneficiary in a policy that insures the life of an individual. (V.T.I.C. Art. 3.49 (part).)
[Sections 1103.006-1103.050 reserved for expansion]
SUBCHAPTER B. DESIGNATION OF BENEFICIARY OR OWNER OF LIFE
INSURANCE POLICY; INSURABLE INTEREST
Sec. 1103.051. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a life insurance policy issued by:
(1) a legal reserve life insurance company; or
(2) a mutual assessment life insurance company. (V.T.I.C. Art. 3.49-1, Secs. 1 (part), 2 (part), 3 (part).)
Sec. 1103.052. LIBERAL CONSTRUCTION. This subchapter shall be liberally construed to implement the purposes of this subchapter. (V.T.I.C. Art. 3.49-1, Sec. 5 (part).)
Sec. 1103.053. INSURABLE INTEREST OF BENEFICIARY, OWNER, TRANSFEREE, OR ASSIGNEE. (a) Except as provided by Subsection (b), a beneficiary or owner of a life insurance policy who is designated in accordance with this subchapter or an entity to which a life insurance policy or an interest, benefit, right, or title in a life insurance policy is transferred or assigned in accordance with this subchapter has an insurable interest in the life of the individual who is insured under the policy.
(b) An individual, partnership, association, corporation, or other legal entity that is directly or indirectly engaged in the business of burying the dead does not directly or indirectly have an insurable interest in the life of an individual unless the interest is established under other applicable statutory law or under common law. (V.T.I.C. Art. 3.49-1, Secs. 1 (part), 2 (part), 3 (part), 4.)
Sec. 1103.054. DESIGNATION OF BENEFICIARY OR OWNER IN POLICY APPLICATION. An individual of legal age may:
(1) apply for a policy insuring the individual's life; and
(2) designate in writing in the application for the policy any individual, partnership, association, corporation, or other legal entity as:
(A) a beneficiary of the policy;
(B) an absolute or partial owner of the policy; or
(C) both a beneficiary and an absolute or partial owner of the policy. (V.T.I.C. Art. 3.49-1, Sec. 1 (part).)
Sec. 1103.055. DESIGNATION OF BENEFICIARY OF POLICY; TRANSFER OR ASSIGNMENT OF POLICY OR INTEREST. An individual of legal age who is insured under a life insurance policy may in writing:
(1) in a manner and to the extent permitted by the policy, designate any individual, partnership, association, corporation, or other legal entity as a beneficiary of the policy; and
(2) in a manner and to the extent not prohibited by the policy, transfer or assign to any entity described by Subdivision (1):
(A) the policy; or
(B) an interest, benefit, right, or title in the policy. (V.T.I.C. Art. 3.49-1, Sec. 2 (part).)
Sec. 1103.056. PURCHASE OF OR APPLICATION FOR POLICY BY THIRD PARTY. An individual of legal age may in a single written document:
(1) consent to the purchase of or application for an individual or group life insurance policy by a third party; and
(2) designate or consent to the designation of any individual, partnership, association, corporation, or other legal entity as:
(A) a beneficiary of the policy;
(B) an absolute or partial owner of the policy; or
(C) both a beneficiary and an absolute or partial owner of the policy. (V.T.I.C. Art. 3.49-1, Sec. 3 (part).)
[Sections 1103.057-1103.100 reserved for expansion]
SUBCHAPTER C. PAYMENT OF PROCEEDS
Sec. 1103.101. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a life insurance policy issued by a legal reserve life insurance company. (V.T.I.C. Art. 3.48 (part).)
Sec. 1103.102. PAYMENT TO DESIGNATED BENEFICIARY. (a) Except as provided by Subsection (b), if an individual obtains a policy insuring the individual's life and designates in writing filed with the company that issues the policy a beneficiary to receive the proceeds of the policy, the company shall pay the proceeds that become due on the death of the insured to the designated beneficiary.
(b) A company that issues a life insurance policy is not required to pay the proceeds of the policy to a designated beneficiary under Subsection (a) if the company receives notice of an adverse claim to the proceeds from a person who has a bona fide legal claim to all or part of the proceeds. (V.T.I.C. Art. 3.48 (part).)
Sec. 1103.103. DISCHARGE OF LIABILITY. In the absence of notice under Section 1103.102(b) received by the company before the date of payment, a company that issues a life insurance policy is discharged from all liability under the policy if the company pays the proceeds of the policy to a designated beneficiary under Section 1103.102(a). (V.T.I.C. Art. 3.48 (part).)
Sec. 1103.104. INTEREST ON PROCEEDS. (a) Interest on the proceeds of a life insurance policy accrues from the date the company that issues the policy receives due proof of loss until the date the company accepts the claim and offers to pay.
(b) Interest that accrues under this section shall be paid at the same time that the proceeds of the policy are paid under this subchapter.
(c) The interest rate under this section is the rate provided in the policy or, if a rate is not provided in the policy, the rate at which interest accrues on proceeds that are left on deposit with the company that issues the policy. (V.T.I.C. Art. 3.48 (part).)
[Sections 1103.105-1103.150 reserved for expansion]
SUBCHAPTER D. FORFEITURE OF BENEFICIARY'S RIGHTS
Sec. 1103.151. FORFEITURE. A beneficiary of a life insurance policy or contract forfeits the beneficiary's interest in the policy or contract if the beneficiary is a principal or an accomplice in wilfully bringing about the death of the insured. (V.T.I.C. Art. 21.23 (part).)
Sec. 1103.152. PAYMENT OF PROCEEDS TO CONTINGENT BENEFICIARY OR TO RELATIVE. (a) Except as provided by Subsection (b), if a beneficiary of a life insurance policy or contract forfeits an interest in the policy or contract under Section 1103.151, a contingent beneficiary named by the insured in the policy or contract is entitled to receive the proceeds of the policy or contract.
(b) A contingent beneficiary is not entitled to receive the proceeds of a life insurance policy or contract if the contingent beneficiary forfeits an interest in the policy or contract under Section 1103.151.
(c) If there is not a contingent beneficiary entitled to receive the proceeds of a life insurance policy or contract under Subsection (a), the nearest relative of the insured is entitled to receive those proceeds. (V.T.I.C. Art. 21.23 (part).)
CHAPTER 1104. LIFE INSURANCE AND ANNUITY CONTRACTS ISSUED
TO CERTAIN PERSONS
SUBCHAPTER A. LIFE INSURANCE AND ANNUITY CONTRACTS WITH
CERTAIN MINORS
Sec. 1104.001. APPLICABILITY OF SUBCHAPTER
Sec. 1104.002. CERTAIN TRANSACTIONS EXEMPT
Sec. 1104.003. AUTHORITY TO CONTRACT
Sec. 1104.004. WRITTEN APPROVAL BY ADULT REQUIRED
Sec. 1104.005. RESCISSION BECAUSE OF MINORITY PROHIBITED
Sec. 1104.006. EFFECT ON POLICY OR CONTRACT
[Sections 1104.007-1104.020 reserved for expansion]
SUBCHAPTER B. TRUSTEE NAMED AS BENEFICIARY OF
LIFE INSURANCE POLICY
Sec. 1104.021. TRUSTEE NAMED AS BENEFICIARY IN POLICY
Sec. 1104.022. TRUSTEE NAMED AS BENEFICIARY IN WILL
Sec. 1104.023. DEBTS; INHERITANCE TAX
Sec. 1104.024. COMMINGLING
Sec. 1104.025. CERTAIN PRIOR BENEFICIARY DESIGNATIONS
NOT AFFECTED
CHAPTER 1104. LIFE INSURANCE AND ANNUITY CONTRACTS ISSUED
TO CERTAIN PERSONS
SUBCHAPTER A. LIFE INSURANCE AND ANNUITY CONTRACTS WITH
CERTAIN MINORS
Sec. 1104.001. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a policy or contract issued by a stock or mutual legal reserve life insurance company that:
(1) is licensed by the department to transact the business of life insurance in this state; and
(2) maintains the legal reserve required by state law. (V.T.I.C. Art. 3.49-2 (part).)
Sec. 1104.002. CERTAIN TRANSACTIONS EXEMPT. This subchapter does not apply to a transaction between an insurance company and a minor described by Section 1104.003(a) that occurs after the date the company receives at its home office or its principal office in this state written notice from a parent of the minor stating that a parent or the parents of the minor elect that this subchapter not apply to the minor specifically named in the notice. (V.T.I.C. Art. 3.49-2 (part).)
Sec. 1104.003. AUTHORITY TO CONTRACT. (a) Subject to this subchapter, a minor 14 years of age or older who is without a guardian of the estate of the minor may:
(1) contract for or otherwise acquire a life, term, or endowment insurance policy or an annuity contract, including:
(A) applying for the policy or contract; and
(B) making agreements with respect to the policy or contract or a right, privilege, or benefit under the policy or contract;
(2) exercise all rights and powers in regard to the policy or contract in the same manner as an adult; and
(3) surrender an interest in the policy or contract and give a discharge for a benefit paid under the policy or contract.
(b) An insurance policy acquired by a minor under this subchapter must:
(1) be owned by the minor; and
(2) insure the life of:
(A) the minor;
(B) a spouse, child, parent, grandparent, or sibling of the minor; or
(C) another in whose life the minor has an insurable interest.
(c) A minor who acquires an annuity contract under this subchapter is the annuitant of the contract during the minor's life.
(d) A minor who acquires an insurance policy or an annuity contract under this subchapter, the estate of the minor, or a spouse, child, parent, grandparent, or sibling of the minor must be the beneficiary of the policy or, in the case of an annuity contract, of the death benefit of the contract. (V.T.I.C. Art. 3.49-2 (part).)
Sec. 1104.004. WRITTEN APPROVAL BY ADULT REQUIRED. An application or agreement made by a minor under this subchapter must be signed or approved in writing by:
(1) a parent, grandparent, or adult sibling of the minor; or
(2) if the minor does not have a parent, grandparent, or adult sibling, an adult eligible under the Texas Probate Code to be appointed guardian of the estate of the minor. (V.T.I.C. Art. 3.49-2 (part).)
Sec. 1104.005. RESCISSION BECAUSE OF MINORITY PROHIBITED. A minor who acquires a policy or contract under this subchapter may not by reason of minority rescind, avoid, or repudiate:
(1) the policy or contract; or
(2) the exercise of a right or privilege, or the receipt of any benefit, under the policy or contract. (V.T.I.C. Art. 3.49-2 (part).)
Sec. 1104.006. EFFECT ON POLICY OR CONTRACT. This subchapter does not modify any provision in a policy or contract. (V.T.I.C. Art. 3.49-2 (part).)
[Sections 1104.007-1104.020 reserved for expansion]
SUBCHAPTER B. TRUSTEE NAMED AS BENEFICIARY OF
LIFE INSURANCE POLICY
Sec. 1104.021. TRUSTEE NAMED AS BENEFICIARY IN POLICY. (a) An individual may make a trust agreement providing that the proceeds of a life insurance policy insuring the individual be made payable to a trustee named as beneficiary in the policy. The validity of a trust agreement or declaration of trust that designates a beneficiary of a life insurance policy is not affected by whether any corpus of the trust exists in addition to the right of the trustee to receive insurance proceeds.
(b) Life insurance policy proceeds described by Subsection (a) shall be paid to the trustee. The trustee shall hold and dispose of the proceeds as provided by the trust agreement. (V.T.I.C. Art. 3.49-3, Sec. 1, as added Acts 60th Leg., R.S., Ch. 701.)
Sec. 1104.022. TRUSTEE NAMED AS BENEFICIARY IN WILL. (a) A life insurance policy may provide that the beneficiary of the policy be a trustee designated by will in accordance with the policy provisions and the requirements of the insurance company.
(b) Except as provided by Subsection (c), on probate of a will described by Subsection (a), the life insurance policy proceeds shall be paid to the trustee. The trustee shall hold and dispose of the proceeds as provided under the terms of the will as the will existed on the date of the testator's death and in the same manner as other testamentary trusts are administered.
(c) Except as otherwise provided by agreement with the insurance company during the life of the insured, the insurance company shall pay the life insurance policy proceeds to the executors, administrators, or assigns of the insured if, during the 18-month period beginning on the first day after the date of the insured's death:
(1) a qualified trustee does not make to the insurance company a claim to the proceeds; or
(2) the insurance company is provided satisfactory evidence showing that there is or will be no trustee to receive the proceeds. (V.T.I.C. Art. 3.49-3, Sec. 2, as added Acts 60th Leg., R.S., Ch. 701.)
Sec. 1104.023. DEBTS; INHERITANCE TAX. Life insurance policy proceeds received by a trustee under this subchapter are not subject to debts of the insured or to inheritance tax to any greater extent than if the proceeds were payable to a beneficiary other than the executor or administrator of the insured's estate. (V.T.I.C. Art. 3.49-3, Sec. 3, as added Acts 60th Leg., R.S., Ch. 701.)
Sec. 1104.024. COMMINGLING. Life insurance policy proceeds received by a trustee under this subchapter may be commingled with any other assets properly coming into the trust. (V.T.I.C. Art. 3.49-3, Sec. 4, as added Acts 60th Leg., R.S., Ch. 701.)
Sec. 1104.025. CERTAIN PRIOR BENEFICIARY DESIGNATIONS NOT AFFECTED. This subchapter does not affect the validity of a life insurance policy beneficiary designation made before July 1, 1967, that names as beneficiary a trustee of a trust established by will. (V.T.I.C. Art. 3.49-3, Sec. 5, as added Acts 60th Leg., R.S., Ch. 701.)
CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1105.001. SHORT TITLE
Sec. 1105.002. APPLICABILITY OF CHAPTER
Sec. 1105.003. EXEMPTIONS
Sec. 1105.004. REQUIRED NONFORFEITURE PROVISIONS
Sec. 1105.005. COMPUTATION OF ADJUSTED PREMIUMS AND
PRESENT VALUES; MORTALITY TABLES AND
INTEREST RATES
Sec. 1105.006. DETERMINATION OF RATED AGE
Sec. 1105.007. COMPUTATION OF CASH SURRENDER
VALUE FOLLOWING DEFAULT
Sec. 1105.008. COMPUTATION OF CASH SURRENDER VALUE ON
SURRENDER FOLLOWING POLICY ANNIVERSARY
Sec. 1105.009. COMPUTATION OF PAID-UP NONFORFEITURE BENEFITS
Sec. 1105.010. PRORATION OF VALUES; NET VALUE OF
PAID-UP ADDITIONS
Sec. 1105.011. INCLUSION OF CERTAIN ADDITIONAL BENEFITS IN
COMPUTING NONFORFEITURE BENEFITS NOT
REQUIRED
Sec. 1105.012. PROGRESSION OF CASH SURRENDER VALUES
[Sections 1105.013-1105.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF ADJUSTED PREMIUMS USING
NONFORFEITURE NET LEVEL PREMIUM METHOD
Sec. 1105.051. APPLICABILITY OF SUBCHAPTER
Sec. 1105.052. COMPUTATION OF ADJUSTED PREMIUMS USING
NONFORFEITURE NET LEVEL PREMIUM METHOD
Sec. 1105.053. COMPUTATION OF AMOUNTS FOR POLICY WITH
CHANGING BENEFITS OR PREMIUMS
Sec. 1105.054. COMPUTATION OF AMOUNTS FOR POLICY ISSUED
ON SUBSTANDARD BASIS
Sec. 1105.055. USE OF MORTALITY TABLES AND INTEREST RATES WITH
NONFORFEITURE NET LEVEL PREMIUM METHOD
Sec. 1105.056. NONFORFEITURE INTEREST RATE
Sec. 1105.057. REFILING OF POLICY PROVISIONS NOT
REQUIRED
[Sections 1105.058-1105.100 reserved for expansion]
SUBCHAPTER C. NONFORFEITURE BENEFITS
FOR CERTAIN PLANS
Sec. 1105.101. NONFORFEITURE BENEFITS FOR INDETERMINATE
PREMIUM PLANS AND CERTAIN OTHER PLANS
[Sections 1105.102-1105.150 reserved for expansion]
SUBCHAPTER D. COMPUTATION OF ADJUSTED
PREMIUMS FOR CERTAIN POLICIES
Sec. 1105.151. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN
POLICIES ISSUED BEFORE JANUARY 1, 1989
Sec. 1105.152. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN
ORDINARY POLICIES ISSUED BEFORE
JANUARY 1, 1989
Sec. 1105.153. COMPUTATION OF ADJUSTED PREMIUMS FOR
CERTAIN INDUSTRIAL POLICIES ISSUED
BEFORE JANUARY 1, 1989
CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1105.001. SHORT TITLE. This chapter may be cited as the Standard Nonforfeiture Law for Life Insurance. (V.T.I.C. Art. 3.44a, Sec. 1.)
Sec. 1105.002. APPLICABILITY OF CHAPTER. (a) This chapter applies to a policy issued by a company on or after January 1, 1974.
(b) For a company that by a written notice filed with the State Board of Insurance after August 23, 1963, but before January 1, 1974, elected to comply before January 1, 1974, with the law codified by this chapter, this chapter also applies to a policy issued by the company after the date specified in the notice and before January 1, 1974. (V.T.I.C. Art. 3.44a, Sec. 13.)
Sec. 1105.003. EXEMPTIONS. (a) This chapter does not apply to:
(1) a policy of reinsurance;
(2) a policy of group insurance;
(3) a policy of pure endowment insurance;
(4) an annuity or reversionary annuity contract;
(5) a term policy of uniform amount that:
(A) does not provide guaranteed nonforfeiture or endowment benefits or renewal of the policy;
(B) has a term of 20 years or less that expires before the insured reaches 71 years of age; and
(C) has uniform premiums that are payable during the entire term of the policy;
(6) a term policy of decreasing amount:
(A) that does not provide guaranteed nonforfeiture or endowment benefits; and
(B) on which each adjusted premium, computed as specified by Subchapter B or D, is less than the adjusted premium computed in that manner for a term policy of uniform amount, or a renewal of a term policy of uniform amount, that:
(i) does not provide guaranteed nonforfeiture or endowment benefits;
(ii) is issued at the same age and for the same initial amount of insurance;
(iii) has a term of 20 years or less and expires before the insured reaches 71 years of age; and
(iv) has uniform premiums that are payable during the entire term of the policy;
(7) a policy:
(A) that does not provide guaranteed nonforfeiture or endowment benefits; and
(B) for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, computed as specified by Section 1105.007, 1105.008, 1105.009, Subchapter B, or Subchapter D, exceeds 2-1/2 percent of the amount of insurance at the beginning of the same policy year;
(8) a policy delivered outside this state through an agent or other representative of the company that issued the policy; or
(9) a policy that:
(A) does not provide for cash values or nonforfeiture values; and
(B) meets the requirements of Section 884.403(b).
(b) For purposes of determining the applicability of this chapter, the age at expiry of a joint term life insurance policy is the age at expiry of the oldest insured life on that date. (V.T.I.C. Art. 3.44a, Sec. 12.)
Sec. 1105.004. REQUIRED NONFORFEITURE PROVISIONS. (a) A life insurance policy delivered or issued for delivery in this state must contain in substance the provisions prescribed by Subsections (b) and (c) or corresponding provisions that:
(1) in the opinion of the commissioner, are at least as favorable to the defaulting or surrendering policyholder; and
(2) essentially comply with Section 1105.012.
(b) A life insurance policy must:
(1) provide that if there is a default in the payment of a premium the company, on proper request not later than the 60th day after the due date of the premium that is in default will grant a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of that due date, in the amount specified by this chapter;
(2) provide that on surrender of the policy not later than the 60th day after the due date of a premium payment that is in default the company will pay, in lieu of a paid-up nonforfeiture benefit, a cash surrender value in the amount specified by this chapter if the premiums have been paid for at least:
(A) three full years for a policy of ordinary insurance; or
(B) five full years for a policy of industrial insurance;
(3) provide that a specified paid-up nonforfeiture benefit is effective as specified by the policy unless the person entitled to make the election elects another available option not later than the 60th day after the due date of a premium payment that is in default; and
(4) provide that on surrender of the policy not later than the 30th day after any policy anniversary the company will pay a cash surrender value in the amount specified by this chapter if:
(A) the policy has become paid up by completion of all premium payments; or
(B) the policy is continued under a paid-up nonforfeiture benefit that became effective on or after:
(i) the third policy anniversary for a policy of ordinary insurance; or
(ii) the fifth policy anniversary for a policy of industrial insurance.
(c) A life insurance policy must contain:
(1) subject to Subsection (e), a statement of:
(A) the mortality table, interest rate, and method used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, if the policy:
(i) causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums; or
(ii) provides an option for changes in benefits or premiums other than a change to a new policy; or
(B) the mortality table and interest rate used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary during the first 20 policy years or the term of the policy, whichever is shorter, if the policy is a policy other than one described by Paragraph (A)(i) or (ii);
(2) a statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by the insurance laws of this state;
(3) an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy and, if a detailed statement of the method used to compute the values and benefits shown in the policy is not stated in the policy, a statement that the method of computation has been filed with the commissioner; and
(4) a statement of the method to be used to compute the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary after the last anniversary for which those values and benefits are consecutively shown in the policy.
(d) A company may substitute for the paid-up nonforfeiture benefit required by Subsection (b)(1) an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits. To elect a nonforfeiture benefit under this subsection, the person entitled to make the election must submit a proper request not later than the 60th day after the due date of the premium that is in default.
(e) The values and benefits described by Subsection (c)(1)(B) must be computed on the assumption that:
(1) there are no dividends or paid-up additions credited to the policy; and
(2) there is no indebtedness to the company on the policy.
(f) A provision prescribed by Subsection (b) or (c) or a portion of a provision that does not apply because of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(g) A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy. (V.T.I.C. Art. 3.44a, Sec. 2.)
Sec. 1105.005. COMPUTATION OF ADJUSTED PREMIUMS AND PRESENT VALUES; MORTALITY TABLES AND INTEREST RATES. (a) Except as provided by Subsection (b) or (e) or Section 1105.055, 1105.152, or 1105.153, an adjusted premium or present value determined under this chapter must be computed on the basis of:
(1) the Commissioners 1941 Standard Ordinary Mortality Table for a policy of ordinary insurance; and
(2) the Commissioners 1941 Standard Industrial Mortality Table for a policy of industrial insurance.
(b) For a category of ordinary insurance issued to insure the life of a woman, an adjusted premium or present value may be computed according to an age not more than three years younger than the actual age of the insured.
(c) All computations must be made using the rate of interest, not to exceed 3-1/2 percent a year, specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits.
(d) In the computation of the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than 130 percent of the rates shown in the applicable mortality table.
(e) Subject to approval by the commissioner, a company may specify a mortality table other than the applicable table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis. (V.T.I.C. Art. 3.44a, Sec. 5(d).)
Sec. 1105.006. DETERMINATION OF RATED AGE. For purposes of this chapter, the date a policy is issued is the date as of which the rated age of the insured is determined. (V.T.I.C. Art. 3.44a, Secs. 5(a) (part), 8(a) (part).)
Sec. 1105.007. COMPUTATION OF CASH SURRENDER VALUE FOLLOWING DEFAULT. (a) Any cash surrender value available under a policy on a default in payment of a premium due on a policy anniversary, regardless of whether required by Section 1105.004, must be an amount not less than the amount, if any, by which the present value, on the policy anniversary, of the future guaranteed benefits that would have been available under the policy, including any existing paid-up additions, had there not been a default exceeds the sum of:
(1) the then present value of the adjusted premiums as determined under Subchapter B or D that correspond to premiums that would have become due on and after the policy anniversary; and
(2) the amount of any indebtedness to the company on the policy.
(b) Subsection (a) does not require a cash surrender value greater than the reserve for the policy computed as provided by Article 3.28.
(c) For a policy to which Subchapter B applies and that by rider or supplemental policy provision provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium, the cash surrender value computed under Subsection (a) must be an amount not less than the sum of:
(1) the cash surrender value as computed under Subsection (a) for an otherwise similar policy issued at the same age without the rider or supplemental policy provision; and
(2) the cash surrender value as computed under Subsection (a) for a policy that provides only the benefits provided by the rider or supplemental policy provision.
(d) For a family policy to which Subchapter B applies and that defines a primary insured and provides term insurance on the life of the spouse of the primary insured that expires before the spouse reaches 71 years of age, the cash surrender value as computed under Subsection (a) must be an amount not less than the sum of:
(1) the cash surrender value as computed under Subsection (a) for an otherwise similar policy issued at the same age that does not provide the term insurance on the life of the spouse; and
(2) the cash surrender value as computed under Subsection (a) for a policy that provides only the benefits provided by the term insurance on the life of the spouse. (V.T.I.C. Art. 3.44a, Sec. 3 (part).)
Sec. 1105.008. COMPUTATION OF CASH SURRENDER VALUE ON SURRENDER FOLLOWING POLICY ANNIVERSARY. Any cash surrender value available not later than the 30th day after the date of a policy anniversary under a policy paid up by completion of all premium payments or a policy continued under any paid-up nonforfeiture benefit, regardless of whether required by Section 1105.004, must be an amount not less than the present value, on the policy anniversary, of the future guaranteed benefits available under the policy, including any existing paid-up additions, less any indebtedness to the company on the policy. (V.T.I.C. Art. 3.44a, Sec. 3 (part).)
Sec. 1105.009. COMPUTATION OF PAID-UP NONFORFEITURE BENEFITS. Any paid-up nonforfeiture benefit available under the policy on default in the payment of a premium due on a policy anniversary must be such that its present value as of the policy anniversary is at least equal to:
(1) the cash surrender value then available under the policy; or
(2) if a cash surrender value is not available under the policy, the cash surrender value that would have been required by this chapter in the absence of the condition that premiums must have been paid for at least a specified period. (V.T.I.C. Art. 3.44a, Sec. 4.)
Sec. 1105.010. PRORATION OF VALUES; NET VALUE OF PAID-UP ADDITIONS. (a) Any cash surrender value and any paid-up nonforfeiture benefit available under a policy on default in the payment of a premium due at any time other than on the policy anniversary must be computed with allowance for the lapse of time and the payment of fractional premiums after the preceding policy anniversary, except that a cash surrender value or nonforfeiture benefit is not required unless the cash surrender value or nonforfeiture benefit was required on the preceding policy anniversary.
(b) A value determined under Sections 1105.005-1105.009, Subchapter B, or Subchapter D may be computed on the assumption that any death benefit is payable at the end of the policy year of death.
(c) The net value of any paid-up additions, other than paid-up term additions, may not be less than the amounts used to provide those additions. (V.T.I.C. Art. 3.44a, Sec. 10 (part).)
Sec. 1105.011. INCLUSION OF CERTAIN ADDITIONAL BENEFITS IN COMPUTING NONFORFEITURE BENEFITS NOT REQUIRED. (a) Notwithstanding Section 1105.007 or 1105.008, additional benefits described by Subsection (b), and premiums for those benefits, may not be included in computing a cash surrender value or nonforfeiture benefits required by this chapter. Additional benefits described by Subsection (b) are not required to be included in any paid-up nonforfeiture benefits.
(b) This section applies to additional benefits payable:
(1) in the event of death or dismemberment by accident;
(2) in the event of total and permanent disability;
(3) as reversionary annuity or deferred reversionary annuity benefits;
(4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this chapter would not apply;
(5) as term insurance on the life of a child that:
(A) is provided in a policy on the life of a parent of the child;
(B) expires before the child reaches 26 years of age;
(C) is uniform in amount after the child reaches one year of age; and
(D) has not become paid up by reason of the death of a parent of the child; or
(6) as other policy benefits additional to life insurance and endowment benefits. (V.T.I.C. Art. 3.44a, Sec. 10 (part).)
Sec. 1105.012. PROGRESSION OF CASH SURRENDER VALUES. (a) This section applies only to a policy issued on or after January 1, 1985.
(b) Any cash surrender value available under a policy to which this section applies on default in the payment of a premium due on any policy anniversary must be in an amount that does not differ by more than two-tenths of one percent of the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of:
(1) the greater of:
(A) zero; or
(B) the basic cash value as determined under Subsection (c); and
(2) the present value of any existing paid-up additions minus the amount of any indebtedness to the company under the policy.
(c) The basic cash value must be equal to the present value, on the applicable policy anniversary, of the future guaranteed benefits that would have been available under the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, had there not been a default, less the then present value of the nonforfeiture factors specified by Subsection (d) corresponding to premiums that would have become due on and after that anniversary. The effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described by Section 1105.007 or 1105.151, as applicable, must be the same as the effects specified by Section 1105.007 or 1105.151, as applicable, on the cash surrender values determined under the applicable section.
(d) The nonforfeiture factor for each policy year must be an amount equal to a percentage of the adjusted premium for the policy year, as computed under Section 1105.052 or 1105.151, as applicable. That percentage must:
(1) be the same percentage for each policy year between the second policy anniversary and the later of:
(A) the fifth policy anniversary; or
(B) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one percent of:
(i) the amount of insurance, if the insurance is uniform in amount; or
(ii) the average amount of insurance at the beginning of each of the first 10 policy years; and
(2) be such that each percentage after the later of the policy anniversaries specified by Subdivision (1) applies to at least five consecutive policy years.
(e) Notwithstanding Subsection (d), the basic cash value may not be less than the value that would be obtained if the adjusted premiums for the policy, as computed under Section 1105.052 or 1105.151, as applicable, were substituted for the nonforfeiture factors in the computation of the basic cash value.
(f) In this section:
(1) an adjusted premium or present value for a particular policy must be computed on the same mortality and interest bases as those used to demonstrate that the policy complies with the other sections of this chapter; and
(2) the cash surrender values must include any endowment benefits available under the policy.
(g) The amount of any cash surrender value available other than on default in payment of a premium due on a policy anniversary, and the amount of any paid-up nonforfeiture benefits available under the policy on default in the payment of a premium, must be determined in a manner consistent with the manner specified by Section 1105.004, 1105.007, 1105.008, 1105.009, 1105.010, 1105.011, or Subchapter B to determine the analogous minimum amount. The amounts of any cash surrender value or paid-up nonforfeiture benefits granted in connection with additional benefits, such as those listed in Section 1105.011(b), must comply with the principles of this section. (V.T.I.C. Art. 3.44a, Sec. 11.)
[Sections 1105.013-1105.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF ADJUSTED PREMIUMS USING
NONFORFEITURE NET LEVEL PREMIUM METHOD
Sec. 1105.051. APPLICABILITY OF SUBCHAPTER. (a) This subchapter applies to a policy issued on or after January 1, 1989.
(b) For a company that by a written notice filed with the State Board of Insurance after August 31, 1981, but before January 1, 1989, elected to comply before January 1, 1989, with the law codified by this subchapter, this subchapter also applies to a policy issued by the company after the date specified in the notice and before January 1, 1989. (V.T.I.C. Art. 3.44a, Secs. 8(a) (part), (h).)
Sec. 1105.052. COMPUTATION OF ADJUSTED PREMIUMS USING NONFORFEITURE NET LEVEL PREMIUM METHOD. (a) Except as provided by Section 1105.054 and subject to Subsection (b), the adjusted premiums for a policy to which this section applies must be computed on an annual basis and must be a uniform percentage of the respective premiums specified by the policy for each policy year so that the present value, at the date of issue of the policy, of all adjusted premiums is equal to the sum of:
(1) the then present value of the future guaranteed benefits available under the policy;
(2) one percent of:
(A) the amount of insurance, if the insurance is uniform in amount; or
(B) the average amount of insurance at the beginning of each of the first 10 policy years; and
(3) 125 percent of the nonforfeiture net level premium as determined under Subsection (d).
(b) The amount of premiums specified by the policy and used in computing adjusted premiums under Subsection (a) does not include:
(1) an amount payable as an extra premium to cover an impairment or special hazard; or
(2) any uniform annual contract charge or policy fee specified by the policy in a statement of the method to be used to compute the cash surrender values and paid-up nonforfeiture benefits.
(c) In applying the percentage specified by Subsection (a)(3), a nonforfeiture net level premium may not be considered to exceed four percent of:
(1) the amount of insurance, if the insurance is uniform in amount; or
(2) the average amount of insurance at the beginning of each of the first 10 policy years.
(d) The nonforfeiture net level premium must be equal to the present value, at the date of issue of the policy, of the guaranteed benefits available under the policy divided by the present value, on the date the policy is issued, of an annuity of one per year payable on the date the policy is issued and on each anniversary of the policy on which a premium becomes due. (V.T.I.C. Art. 3.44a, Secs. 8(a) (part), (b).)
Sec. 1105.053. COMPUTATION OF AMOUNTS FOR POLICY WITH CHANGING BENEFITS OR PREMIUMS. (a) This section applies only to a policy that:
(1) causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums; or
(2) provides an option for changes in benefits or premiums other than a change to a new policy.
(b) The adjusted premiums and present values as to a policy to which this section applies must initially be computed on the assumption that future benefits and premiums will not change from those specified on the date the policy is issued. At the time of a change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums, and present values must be recomputed on the assumption that future benefits and premiums will not change from those specified by the policy immediately after the change.
(c) Except as provided by Section 1105.054, the recomputed future adjusted premiums as to a policy to which this section applies must be a uniform percentage of the respective future premiums specified by the policy for each policy year, so that the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums is equal to the amount by which the sum of the then present value of the then future guaranteed benefits available under the policy and the additional expense allowance, as computed under Subsection (e), if any, exceeds the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
(d) The amount of future premiums specified by the policy and used in computing adjusted premiums under Subsection (c) does not include:
(1) an amount payable as an extra premium to cover an impairment or special hazard; or
(2) any uniform annual contract charge or policy fee specified by the policy in a statement of the method to be used to compute the cash surrender values and paid-up nonforfeiture benefits.
(e) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, is the sum of:
(1) one percent of the amount, if any, by which the average amount of insurance at the beginning of each of the first 10 policy years after the change exceeds the average amount of insurance before the change at the beginning of each of the first 10 policy years after the time of the most recent previous change or, if there has not been a previous change, the date the policy is issued; and
(2) 125 percent of any increase in the nonforfeiture net level premium.
(f) The recomputed nonforfeiture net level premium must be equal to the quotient of:
(1) the sum of:
(A) the nonforfeiture net level premium applicable before the change multiplied by the present value of an annuity of one per year payable on each anniversary of the policy on or after the date of the change on which a premium would have become due had the change not occurred; and
(B) the present value of the increase in future guaranteed benefits available under the policy; divided by
(2) the present value of an annuity of one per year payable on each anniversary of the policy, on or after the date of the change, on which a premium becomes due. (V.T.I.C. Art. 3.44a, Sec. 8(c).)
Sec. 1105.054. COMPUTATION OF AMOUNTS FOR POLICY ISSUED ON SUBSTANDARD BASIS. (a) This section applies only to a policy issued on a substandard basis that provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis that provides higher uniform amounts of insurance. This section applies notwithstanding any provision of this subchapter to the contrary.
(b) Adjusted premiums and present values as to a policy to which this section applies may be computed as if the policy were issued to provide the higher uniform amounts of insurance of an otherwise similar policy issued on the standard basis. (V.T.I.C. Art. 3.44a, Sec. 8(d).)
Sec. 1105.055. USE OF MORTALITY TABLES AND INTEREST RATES WITH NONFORFEITURE NET LEVEL PREMIUM METHOD. (a) Subject to Subsections (c)-(i), an adjusted premium or present value computed under this subchapter must be computed:
(1) for a policy of ordinary insurance:
(A) on the basis of the Commissioners 1980 Standard Ordinary Mortality Table; or
(B) at the option of the company for any one or more specified plans of life insurance, on the basis of the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors; and
(2) for a policy of industrial insurance, on the basis of the Commissioners 1961 Standard Industrial Mortality Table.
(b) Subject to Subsections (c)-(i), computations on each policy issued in a particular calendar year must be made using a rate of interest not to exceed the nonforfeiture interest rate as defined by Section 1105.056 for a policy issued in that calendar year.
(c) At the option of the company, computations for each policy issued in a particular calendar year may be made using a rate of interest not to exceed the nonforfeiture interest rate, as defined by Section 1105.056, for a policy issued in the preceding calendar year.
(d) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, regardless of whether required by Section 1105.004, must be computed on the basis of the mortality table and rate of interest used to determine the amount of the paid-up nonforfeiture benefit and any paid-up dividend additions.
(e) A company may compute the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions under the policy, on the basis of an interest rate not less than the rate specified by the policy for computing cash surrender values.
(f) In the computation of the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than the rates shown in:
(1) the Commissioners 1980 Extended Term Insurance Table, for a policy of ordinary insurance; or
(2) the Commissioners 1961 Industrial Extended Term Insurance Table, for a policy of industrial insurance.
(g) For a policy issued on a substandard basis, the computation of any adjusted premium or present value may be based on appropriate modifications to a table described by Subsection (f).
(h) Any ordinary mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by commissioner rule for use in determining the minimum nonforfeiture standard may be substituted for:
(1) the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors; or
(2) the Commissioners 1980 Extended Term Insurance Table.
(i) Any industrial mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by commissioner rule for use in determining the minimum nonforfeiture standard may be substituted for:
(1) the Commissioners 1961 Standard Industrial Mortality Table; or
(2) the Commissioners 1961 Industrial Extended Term Insurance Table. (V.T.I.C. Art. 3.44a, Sec. 8(e).)
Sec. 1105.056. NONFORFEITURE INTEREST RATE. The annual nonforfeiture interest rate for a policy issued in a particular calendar year is equal to 125 percent of the calendar year statutory valuation interest rate for that policy as defined by Article 3.28, rounded to the nearest one-fourth of one percent. (V.T.I.C. Art. 3.44a, Sec. 8(f).)
Sec. 1105.057. REFILING OF POLICY PROVISIONS NOT REQUIRED. Notwithstanding any provision of this code to the contrary, as to a policy to which this subchapter applies, a refiling of nonforfeiture values or of the method of computing nonforfeiture values for a previously approved policy form that involves only a change in the interest rate or mortality table used to compute nonforfeiture values does not require refiling of any provision of the policy form. (V.T.I.C. Art. 3.44a, Sec. 8(g).)
[Sections 1105.058-1105.100 reserved for expansion]
SUBCHAPTER C. NONFORFEITURE BENEFITS
FOR CERTAIN PLANS
Sec. 1105.101. NONFORFEITURE BENEFITS FOR INDETERMINATE PREMIUM PLANS AND CERTAIN OTHER PLANS. (a) This section applies to a plan of life insurance that:
(1) provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience; or
(2) is such that minimum values cannot be determined by a method described by Sections 1105.004-1105.009, Subchapter B, or Subchapter D.
(b) The commissioner must be satisfied that:
(1) the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by Sections 1105.004-1105.009, Subchapter B, or Subchapter D; and
(2) the benefits and the pattern of premiums of the plan are not such as to mislead prospective policyholders or insured persons.
(c) The cash surrender values and paid-up nonforfeiture benefits provided by the plan may not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this subchapter as determined by commissioner rule.
(d) Notwithstanding any other law of this state, any policy, contract, or certificate providing life insurance under the plan must be approved by the commissioner before the plan may be marketed, issued, delivered, or used in this state. (V.T.I.C. Art. 3.44a, Sec. 9.)
[Sections 1105.102-1105.150 reserved for expansion]
SUBCHAPTER D. COMPUTATION OF ADJUSTED
PREMIUMS FOR CERTAIN POLICIES
Sec. 1105.151. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) This section applies only to a policy issued before January 1, 1989, to which Subchapter B does not apply.
(b) The adjusted premiums for a policy to which this section applies must be computed on an annual basis or, at the option of the company, on a fully continuous basis if that basis is consistent with actual policy provisions and the use of that basis is specified by the policy.
(c) Except as provided by Subsection (f), the adjusted premiums must be a uniform percentage of the respective premiums specified by the policy for each policy year, excluding amounts stated in the policy as extra premiums to cover impairments or special hazards, so that the present value, as of the date the policy is issued, of all the adjusted premiums is equal to the sum of:
(1) the then present value of the future guaranteed benefits available under the policy;
(2) two percent of:
(A) the amount of insurance, if the insurance is uniform in amount; or
(B) the equivalent uniform amount of insurance, as determined under this section, if the amount of insurance varies with the duration of the policy;
(3) 40 percent of the adjusted premium for the first policy year; and
(4) 25 percent of the lesser of:
(A) the adjusted premium for the first policy year; or
(B) the adjusted premium for a whole life policy of the same or an equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance.
(d) In applying the percentages specified by Subsections (c)(3) and (4), an adjusted premium may not be considered to exceed four percent of the amount of insurance or equivalent uniform amount.
(e) For purposes of this section, for a policy that provides an amount of insurance that varies with the duration of the policy:
(1) except as provided by Subdivision (2), the equivalent uniform amount of insurance is considered to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy; and
(2) if the policy is issued on the life of a child younger than 10 years of age, the equivalent uniform amount of insurance may be computed as though the amount of insurance provided by the policy before the insured reaches 10 years of age were the amount provided by the policy at age 10.
(f) The adjusted premiums for a policy that provides term insurance benefits by rider or a supplemental policy provision must be equal to the adjusted premiums for an otherwise similar policy issued at the same age without the term insurance benefits, increased, during the period for which premiums for the term insurance benefits are payable, by the adjusted premiums for the term insurance. The adjusted premiums specified by this subsection must be computed separately in the manner specified by Subsections (b)-(e). (V.T.I.C. Art. 3.44a, Secs. 5(a) (part), (b), (c).)
Sec. 1105.152. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN ORDINARY POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) Except as provided by Subsection (b), this section applies only to an ordinary policy to which Subchapter B does not apply and that is issued on or after January 1, 1974 and before January 1, 1989.
(b) For a company that by a written notice filed with the State Board of Insurance after August 23, 1963, but before January 1, 1974, elected to comply before January 1, 1974, with the law codified by this section, this section also applies to an ordinary policy issued by the company after the date specified in the notice and before January 1, 1974.
(c) An adjusted premium or present value determined under this chapter as to a policy to which this section applies must be computed on the basis of the Commissioners 1958 Standard Ordinary Mortality Table.
(d) A computation as to a policy to which this section applies must be made using the rate of interest specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits, except that the rate of interest may not exceed:
(1) 3-1/2 percent a year for a policy issued before June 14, 1973;
(2) 4 percent a year for a policy issued on or after June 14, 1973, and before August 29, 1977;
(3) 5-1/2 percent a year for a policy issued on or after August 29, 1977, other than a single premium whole life or endowment insurance policy; or
(4) 6-1/2 percent a year for a single premium whole life or endowment insurance policy issued on or after August 29, 1977.
(e) For a category of ordinary insurance issued to insure the life of a woman:
(1) an adjusted premium or present value for a policy issued before August 29, 1977, may be computed according to an age not more than three years younger than the actual age of the insured; and
(2) an adjusted premium or present value for a policy issued on or after August 29, 1977, may be computed according to an age not more than six years younger than the actual age of the insured.
(f) In the computation of the present value of paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may not exceed the rates shown in the Commissioners 1958 Extended Term Insurance Table.
(g) Subject to approval by the commissioner, a company may specify a mortality table other than the table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis. (V.T.I.C. Art. 3.44a, Sec. 6.)
Sec. 1105.153. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN INDUSTRIAL POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) Except as provided by Subsection (b), this section applies only to an industrial policy to which Subchapter B does not apply and that is issued on or after January 1, 1974, and before January 1, 1989.
(b) For a company that by a written notice filed with the State Board of Insurance after August 23, 1963, but before January 1, 1974, elected to comply before January 1, 1974, with the law codified by this section, this section also applies to an industrial policy issued by the company after the date specified in the notice and before January 1, 1974.
(c) An adjusted premium or present value determined under this chapter as to a policy to which this section applies must be computed on the basis of the Commissioners 1961 Standard Industrial Mortality Table.
(d) A computation as to a policy to which this section applies must be made using the rate of interest specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits, except that the rate of interest may not exceed:
(1) 3-1/2 percent a year for a policy issued before June 14, 1973;
(2) 4 percent a year for a policy issued on or after June 14, 1973, and before August 29, 1977;
(3) 5-1/2 percent a year for a policy issued on or after August 29, 1977, other than a single premium whole life or endowment insurance policy; or
(4) 6-1/2 percent a year for a single premium whole life or endowment insurance policy issued on or after August 29, 1977.
(e) In the computation of the present value of paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may not exceed the rates shown in the Commissioners 1961 Industrial Extended Term Insurance Table.
(f) Subject to approval by the commissioner, a company may specify a mortality table other than the table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis. (V.T.I.C. Art. 3.44a, Sec. 7.)
CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE
POLICIES
Sec. 1106.001. APPLICABILITY OF CHAPTER
Sec. 1106.002. REINSTATEMENT REQUIRED; EXCEPTION
Sec. 1106.003. MENTAL INCAPACITY DEFINED
Sec. 1106.004. DIAGNOSIS OF MENTAL INCAPACITY REQUIRED
Sec. 1106.005. REQUEST FOR REINSTATEMENT; LIMITATION
Sec. 1106.006. REINSTATEMENT
Sec. 1106.007. EFFECT OF REINSTATEMENT
Sec. 1106.008. REDUCTION IN BENEFITS
Sec. 1106.009. DISCLOSURE
Sec. 1106.010. RULES
CHAPTER 1106. REINSTATEMENT OF CERTAIN LIFE INSURANCE
POLICIES
Sec. 1106.001. APPLICABILITY OF CHAPTER. (a) This chapter applies to each individual life insurance policy issued to a resident of this state by an insurer authorized to engage in the business of insurance in this state, including a stipulated premium company and a fraternal benefit society, that is subject to lapse on or after September 1, 1995.
(b) This chapter does not apply to a life insurance policy that provides nonforfeiture benefits in accordance with the requirements of this code. (V.T.I.C. Art. 3.44d, Sec. 1.)
Sec. 1106.002. REINSTATEMENT REQUIRED; EXCEPTION. (a) On the lapse of an individual life insurance policy following the unintentional default in the payment of premiums caused by the mental incapacity of the insured, a person is entitled to have the policy reinstated under this chapter if:
(1) the policy had been in effect continuously for at least five years immediately preceding the lapse; and
(2) there was not a default in the payment of premiums on the policy during the period described by Subdivision (1).
(b) The insurer is not required to reinstate a policy or pay benefits under this chapter if the insured first became mentally incapacitated after the expiration of an applicable grace period contained in the policy. (V.T.I.C. Art. 3.44d, Secs. 2(a), 7.)
Sec. 1106.003. MENTAL INCAPACITY DEFINED. In this chapter, "mental incapacity" means a lack of the ability to:
(1) understand and appreciate the nature and consequences of a decision regarding the failure to pay a premium when due; and
(2) reach an informed decision in the matter. (V.T.I.C. Art. 3.44d, Sec. 3(a) (part).)
Sec. 1106.004. DIAGNOSIS OF MENTAL INCAPACITY REQUIRED. For purposes of this chapter, mental incapacity must be:
(1) established by the clinical diagnosis of a physician licensed in this state who is qualified to make the diagnosis; and
(2) based on reasonable medical judgment. (V.T.I.C. Art. 3.44d, Secs. 3(a) (part), (b).)
Sec. 1106.005. REQUEST FOR REINSTATEMENT; LIMITATION. (a) A request for reinstatement of a policy under this chapter and proof of mental incapacity may be filed with the insurer by:
(1) the insured;
(2) the insured's legal guardian or other legal representative; or
(3) the legal representative of the insured's estate.
(b) The request and the proof of mental incapacity must be filed not later than the first anniversary of the date the policy lapses. (V.T.I.C. Art. 3.44d, Sec. 4.)
Sec. 1106.006. REINSTATEMENT. (a) After the requirements of Section 1106.005 have been satisfied, the insurer shall reinstate the policy.
(b) The policy must be reinstated within one year from the date of lapse on payment of:
(1) the premiums owed from the date of initial lapse to the date of reinstatement; and
(2) interest on the premiums at a rate not to exceed six percent a year for the period.
(c) The insurer may not require evidence of insurability as a condition of reinstatement. (V.T.I.C. Art. 3.44d, Secs. 2(b), 5(a), (b).)
Sec. 1106.007. EFFECT OF REINSTATEMENT. On reinstatement of the policy, the original contractual provisions apply as if the coverage had been continuous. (V.T.I.C. Art. 3.44d, Sec. 5(c).)
Sec. 1106.008. REDUCTION IN BENEFITS. If there is an uncontroverted claim for benefits in an amount that exceeds the amount of premiums and interest owed and unpaid under a policy that is eligible for reinstatement under this chapter, the insurer shall pay the amount of benefits owed reduced by the amount of premiums and interest owed and unpaid on the date the benefits are paid. (V.T.I.C. Art. 3.44d, Sec. 6.)
Sec. 1106.009. DISCLOSURE. (a) Each insurer shall disclose fully to each policyholder or insured the requirements of this chapter.
(b) As to a policy to which this chapter applies that was issued on or after September 1, 1995, an insurer may make the disclosure required by Subsection (a):
(1) not later than the 90th day after the date the policy lapses; or
(2) by including the disclosure information in the policy or in an endorsement attached to the policy.
(c) As to a policy to which this chapter applies that was issued before September 1, 1995, and for which the insurer did not make the required disclosure on or before November 30, 1995, the insurer shall make the disclosure required by Subsection (a) not later than the 90th day after the date the policy lapses.
(d) Notice is considered to comply with Subsection (b) or (c) if the notice is mailed by first class mail to the last known address of the policyholder.
(e) The disclosure required by Subsection (a) must be made in the form and manner prescribed by the commissioner after notice and hearing. (V.T.I.C. Art. 3.44d, Secs. 8(a), (b), (c), (d) (part).)
Sec. 1106.010. RULES. The commissioner shall adopt reasonable rules to implement this chapter. (V.T.I.C. Art. 3.44d, Sec. 8(d) (part).)
CHAPTER 1107. STANDARD NONFORFEITURE LAW
FOR CERTAIN ANNUITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1107.001. APPLICABILITY OF CHAPTER
Sec. 1107.002. EXEMPTIONS
Sec. 1107.003. REQUIRED NONFORFEITURE PROVISIONS
Sec. 1107.004. OPTIONAL TERMINATION PROVISION
Sec. 1107.005. CONTRACT DISCLOSURE THAT CERTAIN BENEFITS
NOT PROVIDED
Sec. 1107.006. MATURITY DATE
[Sections 1107.007-1107.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF MINIMUM
NONFORFEITURE AMOUNT
Sec. 1107.051. MINIMUM NONFORFEITURE AMOUNT
Sec. 1107.052. CONTRACT WITH FLEXIBLE CONSIDERATIONS
Sec. 1107.053. CONTRACT WITH FIXED, SCHEDULED
CONSIDERATIONS
Sec. 1107.054. CONTRACT WITH SINGLE CONSIDERATION
[Sections 1107.055-1107.100 reserved for expansion]
SUBCHAPTER C. VALUE OF NONFORFEITURE BENEFITS
Sec. 1107.101. PRESENT VALUE OF PAID-UP ANNUITY BENEFIT
Sec. 1107.102. COMPUTATION OF PAID-UP ANNUITY
BENEFIT UNDER CERTAIN CONTRACTS
Sec. 1107.103. COMPUTATION OF CASH SURRENDER BENEFIT
Sec. 1107.104. COMPUTATION OF DEATH BENEFIT
Sec. 1107.105. COMPUTATION OF BENEFITS AVAILABLE AT
TIME OTHER THAN CONTRACT ANNIVERSARY
Sec. 1107.106. MINIMUM NONFORFEITURE VALUES UNDER
CONTRACT THAT PROVIDES ANNUITY AND
LIFE INSURANCE BENEFITS
Sec. 1107.107. COMPUTATIONS NOT AFFECTED BY ADDITIONAL
BENEFITS
CHAPTER 1107. STANDARD NONFORFEITURE LAW
FOR CERTAIN ANNUITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1107.001. APPLICABILITY OF CHAPTER. (a) This chapter applies to an annuity contract issued on or after August 29, 1979.
(b) For a company that by a written notice filed with the State Board of Insurance after August 29, 1977, but before August 29, 1979, elected to comply before August 29, 1979, with the law codified by this chapter, this chapter also applies to an annuity contract issued by the company after the date specified in the notice and before August 29, 1979. (V.T.I.C. Art. 3.44b, Secs. 1 (part), 11.)
Sec. 1107.002. EXEMPTIONS. (a) This chapter does not apply to:
(1) a policy of reinsurance;
(2) a group annuity contract, other than a plan that provides individual retirement accounts or individual retirement annuities under Section 408, Internal Revenue Code of 1986, as amended, that is purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, by an employee organization, or by both;
(3) a premium deposit fund;
(4) a variable annuity contract;
(5) an investment annuity contract;
(6) an immediate annuity contract;
(7) a deferred annuity contract under which annuity payments have begun; or
(8) a reversionary annuity contract.
(b) This chapter does not apply to a contract delivered outside this state through an agent or other representative of the company that issues the contract. (V.T.I.C. Art. 3.44b, Sec. 10.)
Sec. 1107.003. REQUIRED NONFORFEITURE PROVISIONS. (a) An annuity contract delivered or issued for delivery in this state must contain in substance the provisions prescribed by this section or corresponding provisions that, in the opinion of the department, are at least as favorable to the contract holder when payment of considerations under the contract ceases.
(b) The annuity contract must provide that when payment of considerations under a contract ceases, the company will grant a paid-up annuity benefit on a plan stipulated in the contract that has a value that complies with this chapter.
(c) An annuity contract that provides for a lump-sum settlement at maturity or at any other time must provide that on surrender of the contract on or before the time annuity payments begin, the company that issues the contract will pay a cash surrender benefit in an amount that complies with this chapter in lieu of a paid-up annuity benefit. A company shall reserve the right to defer payment of any cash surrender benefit for a period of six months after demand for payment of the benefit is made with surrender of the contract.
(d) An annuity contract must contain:
(1) a statement of the mortality table, if any, and interest rates to be used to compute any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with information that is sufficient to determine the amounts of the benefits;
(2) a statement that any paid-up annuity, cash surrender, or death benefits available under the contract are not less than the minimum benefits required by this state; and
(3) an explanation of the manner in which a paid-up annuity, cash surrender, or death benefit is altered by the existence of any additional amounts credited to the contract by the company that issues the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract. (V.T.I.C. Art. 3.44b, Sec. 1 (part).)
Sec. 1107.004. OPTIONAL TERMINATION PROVISION. (a) Notwithstanding the requirements of Section 1107.003, an annuity contract may provide that if no considerations are received under the contract for two years, and if at maturity, payments on the portion of the paid-up annuity benefit on the plan stipulated in the contract attributable to considerations paid before that period would be less than $20 each month, the company has the option to terminate the contract by making a cash payment of the then present value of that portion of the paid-up annuity benefit.
(b) If an annuity contract contains a provision permitted under Subsection (a):
(1) the present value of a portion of a paid-up annuity benefit paid under that provision must be computed on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit; and
(2) a payment made under that provision relieves the company of any further obligation under the contract. (V.T.I.C. Art. 3.44b, Sec. 1 (part).)
Sec. 1107.005. CONTRACT DISCLOSURE THAT CERTAIN BENEFITS NOT PROVIDED. An annuity contract that does not provide a cash surrender benefit or that does not provide a death benefit that is at least equal to the minimum nonforfeiture amount for the contract under Subchapter B before annuity payments begin must include a statement in a prominent place in the contract that those benefits are not provided. (V.T.I.C. Art. 3.44b, Sec. 7.)
Sec. 1107.006. MATURITY DATE. (a) In determining the value of benefits under Sections 1107.102, 1107.103, and 1107.104, and subject to Subsection (b), if an annuity contract permits an election to have annuity payments begin on optional maturity dates, the maturity date is considered to be the latest date on which an election is permitted by the contract.
(b) A maturity date determined under this section may not be later than the later of:
(1) the next anniversary of the annuity contract that follows the annuitant's 70th birthday; or
(2) the 10th anniversary of the contract. (V.T.I.C. Art. 3.44b, Sec. 6.)
[Sections 1107.007-1107.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF MINIMUM
NONFORFEITURE AMOUNT
Sec. 1107.051. MINIMUM NONFORFEITURE AMOUNT. The minimum value under Subchapter C of a paid-up annuity, cash surrender, or death benefit shall be computed on the basis of the minimum nonforfeiture amount prescribed by this subchapter. (V.T.I.C. Art. 3.44b, Sec. 2 (intro).)
Sec. 1107.052. CONTRACT WITH FLEXIBLE CONSIDERATIONS. (a) This section applies only to an annuity contract that provides for the payment of flexible considerations.
(b) The minimum nonforfeiture amount on or before annuity payments begin is an amount equal to the sum of the prescribed percentages of the amount of net considerations paid before the minimum nonforfeiture amount is computed, accumulated at an interest rate of three percent per year, plus any additional amount credited to the contract by the company that issues the contract, less the amount of:
(1) any withdrawal from or partial surrender of the contract made before the minimum nonforfeiture amount is computed, accumulated at an interest rate of three percent per year; and
(2) any indebtedness to the company on the contract, including any accrued interest due on the indebtedness.
(c) For the purposes of this section, the amount of net consideration for a contract year may not be less than $0 and is computed by subtracting from the amount of gross considerations credited to the contract during that contract year:
(1) an annual contract charge of $30; and
(2) a collection charge of $1.25 for each consideration credited to the contract during that year.
(d) Except as provided by Subsection (e), the percentage of the amount of net consideration to be used in computing a minimum nonforfeiture amount under Subsection (b) is:
(1) 65 percent for the first contract year; and
(2) 87.5 percent for each subsequent contract year.
(e) For a renewal contract year, the percentage of the amount of net consideration to be used to compute a minimum nonforfeiture amount under Subsection (b) is 65 percent of the portion of the total amount of net consideration that exceeds by not more than two times the sum of those portions of the amount of net consideration in all preceding contract years for which the percentage was 65 percent. (V.T.I.C. Art. 3.44b, Sec. 2(a).)
Sec. 1107.053. CONTRACT WITH FIXED, SCHEDULED CONSIDERATIONS. For an annuity contract that provides for the payment of fixed, scheduled considerations, the minimum nonforfeiture amount is computed in the same manner as the minimum nonforfeiture amount for a contract with flexible considerations that are paid annually, except that:
(1) the amount of net consideration for a contract year is computed using an annual contract charge equal to the lesser of:
(A) $30; or
(B) 10 percent of the amount of the gross annual considerations paid on the contract;
(2) the percentage of the net consideration amount to be used to compute the minimum nonforfeiture amount is 65 percent of the amount of net consideration for the first contract year plus 22.5 percent of the amount by which the amount of net consideration for the first contract year exceeds the lesser of:
(A) the amount of net consideration for the second contract year; or
(B) the amount of net consideration for the third contract year; and
(3) the computation must assume that the considerations are paid annually in advance. (V.T.I.C. Art. 3.44b, Sec. 2(b).)
Sec. 1107.054. CONTRACT WITH SINGLE CONSIDERATION. For an annuity contract that provides for the payment of a single consideration, the minimum nonforfeiture amount is computed in the same manner as the minimum nonforfeiture amount for a contract with flexible considerations, except that:
(1) the net consideration amount to be used to compute the minimum nonforfeiture amount is the amount of the gross considerations paid under the contract less a contract charge of $75; and
(2) the percentage of the net consideration amount to be used to compute the minimum nonforfeiture amount is 90 percent. (V.T.I.C. Art. 3.44b, Sec. 2(c).)
[Sections 1107.055-1107.100 reserved for expansion]
SUBCHAPTER C. VALUE OF NONFORFEITURE BENEFITS
Sec. 1107.101. PRESENT VALUE OF PAID-UP ANNUITY BENEFIT. (a) The present value of any paid-up annuity benefit available under an annuity contract on the date annuity payments are to begin may not be less than the minimum nonforfeiture amount for that contract on that date as computed under Subchapter B.
(b) The present value of the paid-up annuity benefit shall be computed using the mortality table, if any, and the interest rate specified in the contract for computing the minimum paid-up annuity benefit guaranteed by the contract. (V.T.I.C. Art. 3.44b, Sec. 3.)
Sec. 1107.102. COMPUTATION OF PAID-UP ANNUITY BENEFIT UNDER CERTAIN CONTRACTS. (a) Subject to Subsection (d), for an annuity contract that does not provide a cash surrender benefit, the present value of a paid-up annuity benefit available as a nonforfeiture option before the maturity date may not be less than the present value of the portion of the maturity value of the paid-up annuity benefit provided under the contract that arises from considerations paid on the contract before the date the contract is surrendered in exchange for or is changed to a deferred paid-up annuity.
(b) The present value of a paid-up annuity benefit under Subsection (a) shall be:
(1) computed for the period before the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations paid on the contract to determine the maturity value; and
(2) increased by any additional amount credited by the company to the contract.
(c) Subject to Subsection (d), for an annuity contract that does not provide a death benefit before annuity payments begin, the present value of a paid-up annuity benefit available as a nonforfeiture option shall be computed using the interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit.
(d) The present value of a paid-up annuity benefit may not be less than the minimum nonforfeiture amount on the date of surrender or change. (V.T.I.C. Art. 3.44b, Sec. 5.)
Sec. 1107.103. COMPUTATION OF CASH SURRENDER BENEFIT. (a) Subject to Subsection (c), the value of a cash surrender benefit available under an annuity contract before the maturity date may not be less than the present value on the date the contract is surrendered of the portion of the maturity value of the paid-up annuity benefit that arises from considerations paid under the contract before that date and that would be provided under the contract at maturity less an amount reflecting any withdrawals from or partial surrenders of the contract before that date and the amount of any indebtedness to the company on the contract, including accrued interest due on the indebtedness, plus any additional amount credited by the company to the contract.
(b) The present value used to compute the minimum cash surrender benefit under Subsection (a) shall be computed using an interest rate that is not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations paid on the contract to determine the maturity value.
(c) The value of a cash surrender benefit may not be less than the minimum nonforfeiture amount on the date the contract is surrendered. (V.T.I.C. Art. 3.44b, Sec. 4 (part).)
Sec. 1107.104. COMPUTATION OF DEATH BENEFIT. The value of a death benefit available under an annuity contract that provides a cash surrender benefit may not be less than the value of the cash surrender benefit. (V.T.I.C. Art. 3.44b, Sec. 4 (part).)
Sec. 1107.105. COMPUTATION OF BENEFITS AVAILABLE AT TIME OTHER THAN CONTRACT ANNIVERSARY. For an annuity contract that requires payment of fixed, scheduled considerations, the value of a paid-up annuity, cash surrender, or death benefit that is available under the contract on a date other than an anniversary of the contract date shall be computed to allow for the lapse of time and any scheduled considerations paid after the beginning of the contract year in which payment of considerations under the contract ceased. (V.T.I.C. Art. 3.44b, Sec. 8.)
Sec. 1107.106. MINIMUM NONFORFEITURE VALUES UNDER CONTRACT THAT PROVIDES ANNUITY AND LIFE INSURANCE BENEFITS. For a contract that provides, by rider or by supplemental provision, both annuity benefits and life insurance benefits that exceed the greater of the value of the cash surrender benefit or the amount with interest of the gross considerations paid on the contract, the value of the minimum nonforfeiture benefits is an amount equal to the value of the minimum nonforfeiture benefits for the annuity portion of the contract and the minimum nonforfeiture benefits, if any, for the life insurance portion of the contract, computed as if each portion were a separate contract. (V.T.I.C. Art. 3.44b, Sec. 9 (part).)
Sec. 1107.107. COMPUTATIONS NOT AFFECTED BY ADDITIONAL BENEFITS. (a) Notwithstanding any other provision of this subchapter or Section 1107.006, a computation of a minimum nonforfeiture amount or of a paid-up annuity, cash surrender, or death benefit under this chapter may not include:
(1) any additional benefit that is:
(A) payable in the event of total and permanent disability;
(B) payable as a reversionary annuity or deferred reversionary annuity benefit; or
(C) payable as another policy benefit in addition to life insurance, endowment, or annuity benefits; or
(2) the considerations paid for the additional benefit.
(b) A paid-up benefit under an annuity contract is not required to include an additional benefit described by Subsection (a) unless the additional benefit separately requires:
(1) a minimum nonforfeiture amount; or
(2) a paid-up annuity, cash surrender, or death benefit. (V.T.I.C. Art. 3.44b, Sec. 9 (part).)
CHAPTER 1108. BENEFITS EXEMPT FROM SEIZURE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1108.001. CONSTRUCTION WITH OTHER LAW
Sec. 1108.002. ANNUITY CONTRACTS
[Sections 1108.003-1108.050 reserved for expansion]
SUBCHAPTER B. EXEMPTIONS FROM SEIZURE
Sec. 1108.051. EXEMPTIONS FOR CERTAIN INSURANCE AND
ANNUITY BENEFITS
Sec. 1108.052. EXEMPTIONS UNAFFECTED BY BENEFICIARY
DESIGNATION
Sec. 1108.053. EXCEPTIONS TO EXEMPTIONS
[Sections 1108.054-1108.100 reserved for expansion]
SUBCHAPTER C. ASSIGNMENT OF BENEFITS
Sec. 1108.101. ASSIGNMENT GENERALLY
Sec. 1108.102. CERTAIN ASSIGNMENTS VOID
CHAPTER 1108. BENEFITS EXEMPT FROM SEIZURE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1108.001. CONSTRUCTION WITH OTHER LAW. The exemptions under this chapter are in addition to the exemptions from garnishment, attachment, execution, or other seizure under Chapter 42, Property Code. (V.T.I.C. Art. 21.22, Sec. 7.)
Sec. 1108.002. ANNUITY CONTRACTS. For purposes of regulation under this code, an annuity contract is considered an insurance policy or contract if the annuity contract is issued:
(1) by a life, health, or accident insurance company, including a mutual company or fraternal benefit society; or
(2) under an annuity or benefit plan used by an employer or individual. (V.T.I.C. Art. 21.22, Sec. 6.)
[Sections 1108.003-1108.050 reserved for expansion]
SUBCHAPTER B. EXEMPTIONS FROM SEIZURE
Sec. 1108.051. EXEMPTIONS FOR CERTAIN INSURANCE AND ANNUITY BENEFITS. (a) Except as provided by Section 1108.053, this section applies to any benefits, including the cash value and proceeds of an insurance policy, to be provided to an insured or beneficiary under:
(1) an insurance policy or annuity contract issued by a life, health, or accident insurance company, including a mutual company or fraternal benefit society; or
(2) an annuity or benefit plan used by an employer or individual.
(b) Notwithstanding any other provision of this code, insurance or annuity benefits described by Subsection (a):
(1) inure exclusively to the benefit of the person for whose use and benefit the insurance or annuity is designated in the policy or contract; and
(2) are fully exempt from:
(A) garnishment, attachment, execution, or other seizure;
(B) seizure, appropriation, or application by any legal or equitable process or by operation of law to pay a debt or other liability of an insured or of a beneficiary, either before or after the benefits are provided; and
(C) a demand in a bankruptcy proceeding of the insured or beneficiary. (V.T.I.C. Art. 21.22, Sec. 1.)
Sec. 1108.052. EXEMPTIONS UNAFFECTED BY BENEFICIARY DESIGNATION. The exemptions provided by Section 1108.051 apply regardless of whether:
(1) the power to change the beneficiary is reserved to the insured; or
(2) the insured or the insured's estate is a contingent beneficiary. (V.T.I.C. Art. 21.22, Sec. 2.)
Sec. 1108.053. EXCEPTIONS TO EXEMPTIONS. The exemptions provided by Section 1108.051 do not apply to:
(1) a premium payment made in fraud of a creditor, subject to the applicable statute of limitations for recovering the payment; or
(2) a debt of the insured or beneficiary secured by a pledge of the insurance policy or the proceeds of the policy. (V.T.I.C. Art. 21.22, Sec. 3.)
[Sections 1108.054-1108.100 reserved for expansion]
SUBCHAPTER C. ASSIGNMENT OF BENEFITS
Sec. 1108.101. ASSIGNMENT GENERALLY. This chapter does not prevent an insured, owner, or annuitant from assigning, in accordance with the terms of the policy or contract:
(1) any benefits to be provided under an insurance policy or annuity contract to which this chapter applies; or
(2) any other rights under the policy or contract. (V.T.I.C. Art. 21.22, Sec. 4.)
Sec. 1108.102. CERTAIN ASSIGNMENTS VOID. If an insurance policy, annuity contract, or annuity or benefit plan described by Section 1108.051 prohibits a beneficiary from assigning or commuting benefits to be provided or other rights under the policy, contract, or plan, an assignment or commutation or attempted assignment or commutation of the benefits or rights by the beneficiary is void. (V.T.I.C. Art. 21.22, Sec. 5.)
CHAPTER 1109. UNCLAIMED LIFE INSURANCE AND ANNUITY CONTRACT
PROCEEDS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1109.001. APPLICABILITY OF CHAPTER
Sec. 1109.002. ADMINISTRATION AND ENFORCEMENT; RULES
Sec. 1109.003. APPROPRIATIONS TO ADMINISTER CHAPTER
[Sections 1109.004-1109.050 reserved for expansion]
SUBCHAPTER B. DELIVERY OF PROCEEDS TO STATE
Sec. 1109.051. COMPANY REPORT OF UNCLAIMED PROCEEDS
Sec. 1109.052. DELIVERY OF PROCEEDS TO COMPTROLLER
Sec. 1109.053. RETENTION OF RECORDS BY INSURANCE COMPANY
Sec. 1109.054. PUBLIC RECORD OF RECEIPT OF PROCEEDS
Sec. 1109.055. STATE RESPONSIBILITY FOR PROCEEDS;
INDEMNIFICATION OF COMPANY
Sec. 1109.056. EXAMINATION OF COMPANY RECORDS
[Sections 1109.057-1109.100 reserved for expansion]
SUBCHAPTER C. PUBLIC NOTICE
Sec. 1109.101. PUBLIC NOTICE OF UNCLAIMED PROCEEDS
[Sections 1109.102-1109.150 reserved for expansion]
SUBCHAPTER D. CLAIMS FOR PROCEEDS
Sec. 1109.151. FILING OF CLAIM
Sec. 1109.152. DETERMINATION OF CLAIM
Sec. 1109.153. APPEAL
Sec. 1109.154. PAYMENT OF CLAIM
CHAPTER 1109. UNCLAIMED LIFE INSURANCE AND ANNUITY CONTRACT
PROCEEDS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1109.001. APPLICABILITY OF CHAPTER. (a) This chapter applies to proceeds held and owing by a life insurance company engaged in the business of insurance in this state if:
(1) the last known address, according to the company's records, of the person entitled to the proceeds is located in this state; and
(2) the proceeds have been unclaimed and unpaid for at least three years after the date, according to the company's records, that the proceeds became due and payable under a life or endowment insurance policy or annuity contract that has matured or terminated.
(b) If a person other than the insured or annuitant is entitled to the proceeds and that person's address is not known to the company or if the identity of the person entitled to the proceeds is not certain from the company's records, it is presumed that the last known address of the person entitled to the proceeds is the same as the last known address of the insured or annuitant according to the company's records.
(c) For purposes of Subsection (a), a life insurance policy not matured by proof of the death of the insured is considered to be matured and the proceeds of the policy are considered to be due and payable only if the policy is in force at the time the insured attained the limiting age under the mortality table on which the reserve is based.
(d) An annuity or other obligation, the payment of which is conditioned on the continued life of any individual, is not considered due and payable for purposes of Subsection (a) without proof that the individual was alive at the time or times required by the contract.
(e) Proceeds otherwise admittedly due and payable under a life or endowment insurance policy or annuity contract that has matured or terminated are considered to be held and owing even if the policy or contract has not been surrendered as required. (V.T.I.C. Art. 4.08, Secs. 2, 3.)
Sec. 1109.002. ADMINISTRATION AND ENFORCEMENT; RULES. (a) This chapter shall be enforced in the manner provided for enforcement of Chapter 74, Property Code, under Subchapter H of that chapter.
(b) The comptroller may adopt rules necessary to administer this chapter. (V.T.I.C. Art. 4.08, Secs. 14, 15.)
Sec. 1109.003. APPROPRIATIONS TO ADMINISTER CHAPTER. To enforce and administer this chapter, the legislature may appropriate unclaimed money received under Chapter 74, Property Code, or under any other statute requiring the delivery of unclaimed property to the comptroller. (V.T.I.C. Art. 4.08, Sec. 9 (part).)
[Sections 1109.004-1109.050 reserved for expansion]
SUBCHAPTER B. DELIVERY OF PROCEEDS TO STATE
Sec. 1109.051. COMPANY REPORT OF UNCLAIMED PROCEEDS. (a) A life insurance company engaged in the business of insurance in this state that on June 30 holds unclaimed proceeds subject to this chapter shall file a report of those proceeds on or before the following November 1. The report shall be filed in writing with the comptroller.
(b) The report is not required to include proceeds that have been paid to another state or other jurisdiction under any law of that state or jurisdiction relating to escheat or unclaimed money.
(c) The report must be signed and sworn to by an officer of the company and must state:
(1) in alphabetical order the full name of the insured or annuitant, the last known address of the insured or annuitant according to the company's records, and the policy or contract number;
(2) the amount due on the policy or contract according to the company's records;
(3) the date the proceeds became payable;
(4) the name and last known address of each beneficiary or other person who, according to the company's records, may have an interest in the proceeds; and
(5) any other identifying information the comptroller requires.
(d) A life insurance company may report individual amounts of less than $50 in the aggregate without providing the information listed by Subsection (c). (V.T.I.C. Art. 4.08, Secs. 2 (part), 3 (part), 4 (part).)
Sec. 1109.052. DELIVERY OF PROCEEDS TO COMPTROLLER. A life insurance company required to file a report under Section 1109.051 shall deliver to the comptroller with the report all unclaimed proceeds described by the report. (V.T.I.C. Art. 4.08, Sec. 6.)
Sec. 1109.053. RETENTION OF RECORDS BY INSURANCE COMPANY. (a) A life insurance company required to file a report under Section 1109.051 shall maintain a record of:
(1) the name and last known address, if any, of the insured, annuitant, or beneficiary;
(2) the policy or contract number; and
(3) the amount of the proceeds due on the policy or contract according to the company's records.
(b) The company shall maintain the record until at least the 10th anniversary of the date the proceeds are required to be reported, regardless of whether the amount was reported in the aggregate. The comptroller by rule may provide for a shorter retention period for the record. (V.T.I.C. Art. 4.08, Sec. 4 (part).)
Sec. 1109.054. PUBLIC RECORD OF RECEIPT OF PROCEEDS. (a) The comptroller shall maintain in the comptroller's office a public record of each delivery of unclaimed proceeds received under this chapter.
(b) Except as to amounts reported in the aggregate, the record must include:
(1) in alphabetical order, the name and last known address of each insured or annuitant and of each beneficiary or other person who, according to the life insurance company's reports, may have an interest in the proceeds; and
(2) with respect to each policy or contract, the policy or contract number, the name of the company, and the amount of the unclaimed proceeds. (V.T.I.C. Art. 4.08, Sec. 12.)
Sec. 1109.055. STATE RESPONSIBILITY FOR PROCEEDS; INDEMNIFICATION OF COMPANY. (a) On the delivery of unclaimed proceeds under this chapter:
(1) the state assumes custody of the proceeds for the benefit of each person entitled to receive the proceeds and for the safekeeping of the proceeds; and
(2) the life insurance company is relieved of and held harmless by the state from any liability relating to the proceeds for a claim existing at the time of delivery of the proceeds to the comptroller or that arises or is made after delivery of the proceeds.
(b) A life insurance company that delivers proceeds to the comptroller under this chapter in good faith is relieved of liability relating to the proceeds to the extent of the value of the proceeds delivered for a claim existing at the time of delivery or that arises or is made after delivery.
(c) If a life insurance company delivers unclaimed proceeds to the comptroller under this chapter in good faith and, after delivery, a person claims the proceeds from the life insurance company or another state claims the proceeds under its laws relating to escheat or unclaimed property, the attorney general shall, on written notice of the claim, defend the life insurance company against the claim. The life insurance company shall be indemnified against liability on the claim from the unclaimed money received under Chapter 74, Property Code, or under any other statute requiring delivery of unclaimed property to the comptroller. (V.T.I.C. Art. 4.08, Secs. 7, 8.)
Sec. 1109.056. EXAMINATION OF COMPANY RECORDS. (a) The comptroller may examine the records of a life insurance company to determine if the company is complying with this chapter.
(b) The comptroller may not make public any information obtained from an examination made under this section. (V.T.I.C. Art. 4.08, Sec. 16.)
[Sections 1109.057-1109.100 reserved for expansion]
SUBCHAPTER C. PUBLIC NOTICE
Sec. 1109.101. PUBLIC NOTICE OF UNCLAIMED PROCEEDS. (a) In the calendar year following the year in which a report required by Section 1109.051 is made and in which the unclaimed proceeds described in the report are delivered to the comptroller under Section 1109.052, the comptroller may publish notice based on the information contained in the report. Except as provided by Subsection (d), the comptroller shall publish the notice once in a newspaper published or having a general circulation in each county of this state in which the last known address of a person appearing to be entitled to any of those proceeds is located.
(b) The notice must:
(1) state in alphabetical order the name of each insured or annuitant under the policies or contracts and the municipality of the insured's or annuitant's last known address, if any; and
(2) state that the unclaimed proceeds have been delivered to the comptroller as of the preceding November 1 and may be claimed from the comptroller.
(c) The publication requirements under Subchapter C, Chapter 74, Property Code, apply to publication of notice under this section.
(d) The comptroller may use a method of publishing notice different from that prescribed by Subsection (a) if the comptroller determines that the different method would be as likely to give actual notice to the person required to be named in the notice as the method prescribed by Subsection (a). (V.T.I.C. Art. 4.08, Sec. 5.)
[Sections 1109.102-1109.150 reserved for expansion]
SUBCHAPTER D. CLAIMS FOR PROCEEDS
Sec. 1109.151. FILING OF CLAIM. A person claiming to be entitled to unclaimed proceeds delivered to the comptroller under this chapter may at any time file a claim for the proceeds with the comptroller. (V.T.I.C. Art. 4.08, Sec. 10 (part).)
Sec. 1109.152. DETERMINATION OF CLAIM. The comptroller may accept or reject a claim made under Section 1109.151. (V.T.I.C. Art. 4.08, Sec. 10 (part).)
Sec. 1109.153. APPEAL. (a) If the comptroller rejects a claim made under Section 1109.151 or does not act on a claim before the 91st day after the date the claim is filed, the claimant may file suit to recover the proceeds.
(b) The comptroller is the defendant in a suit filed under this section. (V.T.I.C. Art. 4.08, Sec. 10 (part).)
Sec. 1109.154. PAYMENT OF CLAIM. The comptroller shall pay from unclaimed money received under Chapter 74, Property Code, or under any other statute requiring the delivery of unclaimed property to the comptroller, a claim that:
(1) the comptroller accepts; or
(2) a court orders the comptroller to pay. (V.T.I.C. Art. 4.08, Sec. 11.)
CHAPTER 1110. INTEREST RATES ON LIFE INSURANCE POLICY LOANS
Sec. 1110.001. DEFINITIONS
Sec. 1110.002. APPLICABILITY OF CHAPTER
Sec. 1110.003. APPLICABILITY OF OTHER LAW
Sec. 1110.004. MAXIMUM INTEREST RATE ON POLICY LOANS
Sec. 1110.005. FREQUENCY OF ADJUSTABLE INTEREST RATE
DETERMINATION
Sec. 1110.006. INFORMATION TO BE INCLUDED IN POLICY
Sec. 1110.007. NOTICE TO POLICYHOLDER
Sec. 1110.008. LOAN VALUE OF POLICY; TERMINATION OF
POLICY BASED ON CHANGE IN INTEREST RATE
CHAPTER 1110. INTEREST RATES ON LIFE INSURANCE POLICY LOANS
Sec. 1110.001. DEFINITIONS. In this chapter:
(1) "Life insurance policy" includes:
(A) a benefit certificate issued by a fraternal benefit society; or
(B) an annuity contract that provides for a life insurance policy loan.
(2) "Life insurance policy loan" includes any premium loan made under a life insurance policy to pay one or more premiums not paid to the life insurer when due. (V.T.I.C. Art. 3.44c, Sec. 3(h) (part).)
Sec. 1110.002. APPLICABILITY OF CHAPTER. This chapter applies only to a life insurance policy issued on or after August 31, 1981. (V.T.I.C. Art. 3.44c, Secs. 3(a) (part), 4.)
Sec. 1110.003. APPLICABILITY OF OTHER LAW. A law not included in this chapter applies to interest rates on life insurance policy loans only if that law is made specifically applicable to those rates. (V.T.I.C. Art. 3.44c, Sec. 3(i).)
Sec. 1110.004. MAXIMUM INTEREST RATE ON POLICY LOANS. (a) In this section, "published monthly average" means:
(1) Moody's Corporate Bond Yield Average--Monthly Average Corporates as published by Moody's Investors Service, Inc., or a successor to that corporation; or
(2) if the rate described by Subdivision (1) is no longer published, a substantially similar average established by rule of the commissioner.
(b) A life insurance policy must provide for an interest rate on a life insurance policy loan that:
(1) does not exceed 10 percent a year; or
(2) is adjustable and does not exceed the lesser of:
(A) 15 percent a year; or
(B) the greater of:
(i) the published monthly average for the calendar month that ended two months before the date on which the rate is determined; or
(ii) the rate used to compute the cash surrender values under the life insurance policy during the applicable period plus one percent per year.
(c) This section also applies to the interest rate charged, on reinstatement of a life insurance policy loan, for the period during and after a lapse of the life insurance policy. (V.T.I.C. Art. 3.44c, Secs. 2; 3(a) (part), (b), (h) (part).)
Sec. 1110.005. FREQUENCY OF ADJUSTABLE INTEREST RATE DETERMINATION. A life insurer shall determine the adjustable interest rate under Section 1110.004(b)(2) at regular intervals at least once every 12 months but not more frequently than once in any three-month period. At the intervals specified in the life insurance policy, the insurer:
(1) may increase the rate charged when the rate under Section 1110.004(b)(2) would result in a rate increase of at least one-half of one percent per year; and
(2) shall reduce the rate charged when the interest rate determined under Section 1110.004(b)(2) would result in a rate decrease of at least one-half of one percent per year. (V.T.I.C. Art. 3.44c, Sec. 3(d).)
Sec. 1110.006. INFORMATION TO BE INCLUDED IN POLICY. (a) A life insurance policy must include the substance of the provisions of Section 1110.004(b) that are applicable to the policy.
(b) A life insurance policy that provides for an adjustable interest rate under Section 1110.004(b)(2) must state the frequency at which the rate is to be determined. (V.T.I.C. Art. 3.44c, Secs. 3(c), (g).)
Sec. 1110.007. NOTICE TO POLICYHOLDER. (a) In this section, "policyholder" includes the owner of a life insurance policy or the person designated to pay premiums as shown on the records of the life insurer.
(b) For a cash loan on a life insurance policy, the life insurer shall notify the policyholder of the initial interest rate on the loan at the time the insurer makes the loan.
(c) For a premium loan on a life insurance policy, the life insurer shall notify the policyholder of the initial interest rate on the loan as soon as reasonably practical after making the loan. Except as provided by Subsection (d), subsequent notice is not required to be given when the insurer makes an additional premium loan on the policy.
(d) At least 30 days before an increase in the interest rate on a life insurance policy loan, the life insurer shall send a notice of the rate increase to the policyholder.
(e) The life insurer shall include in a notice required by this section the substance of the provisions of Section 1110.004(b) applicable to the policy. For a life insurance policy loan with an adjustable interest rate, the notice must state the frequency at which the rate is to be determined. (V.T.I.C. Art. 3.44c, Secs. 3(e), (h) (part).)
Sec. 1110.008. LOAN VALUE OF POLICY; TERMINATION OF POLICY BASED ON CHANGE IN INTEREST RATE. (a) The loan value of a life insurance policy shall be determined in accordance with Section 1101.009.
(b) A life insurance policy may not be terminated in a policy year solely as the result of a change in the policy loan interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which coverage would otherwise have terminated if there had been no change in the interest rate. (V.T.I.C. Art. 3.44c, Sec. 3(f).)
CHAPTER 1111. LIFE AND VIATICAL SETTLEMENTS AND
ACCELERATED TERM LIFE INSURANCE BENEFITS
SUBCHAPTER A. LIFE AND VIATICAL SETTLEMENTS
Sec. 1111.001. DEFINITIONS
Sec. 1111.002. PURPOSE
Sec. 1111.003. RULES; REGISTRATION AND REGULATION
Sec. 1111.004. ANNUAL FEE FOR REGISTRATION
Sec. 1111.005. DENIAL, SUSPENSION, OR REVOCATION OF
REGISTRATION; ENFORCEMENT
Sec. 1111.006. APPLICABILITY OF OTHER INSURANCE LAWS
[Sections 1111.007-1111.050 reserved for expansion]
SUBCHAPTER B. ACCELERATED TERM LIFE INSURANCE BENEFITS
Sec. 1111.051. DEFINITIONS
Sec. 1111.052. AUTHORITY TO PAY ACCELERATED TERM LIFE
BENEFITS
Sec. 1111.053. RULES
CHAPTER 1111. LIFE AND VIATICAL SETTLEMENTS AND
ACCELERATED TERM LIFE INSURANCE BENEFITS
SUBCHAPTER A. LIFE AND VIATICAL SETTLEMENTS
Sec. 1111.001. DEFINITIONS. In this subchapter:
(1) "Life settlement" means an agreement that is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state under which a person pays anything of value that is:
(A) less than the expected death benefit of a policy insuring the life of an individual who does not have a catastrophic or life-threatening illness or condition; and
(B) paid in return for the policy owner's or certificate holder's transfer of the death benefit under or ownership of the policy.
(2) "Person" means an individual, corporation, trust, partnership, association, or any other legal entity.
(3) "Transfer" includes an assignment, bequest, devise, or sale.
(4) "Viatical settlement" means an agreement that is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state under which a person pays anything of value that is:
(A) less than the expected death benefit of a policy insuring the life of an individual who has a catastrophic or life-threatening illness or condition; and
(B) paid in return for the policy owner's or certificate holder's transfer of the death benefit under or ownership of the policy. (V.T.I.C. Art. 3.50-6A, Sec. 1.)
Sec. 1111.002. PURPOSE. The purpose of this subchapter is to:
(1) provide for registration of persons engaged in the business of life or viatical settlements; and
(2) provide consumer protection for a person who transfers the person's life insurance policy. (V.T.I.C. Art. 3.50-6A, Sec. 2(a).)
Sec. 1111.003. RULES; REGISTRATION AND REGULATION. (a) To implement this subchapter, the commissioner shall adopt reasonable rules relating to life settlements and relating to viatical settlements.
(b) The rules adopted by the commissioner under this section must include rules governing:
(1) registration of a person engaged in the business of life settlements;
(2) registration of a person engaged in the business of viatical settlements;
(3) approval of contract forms;
(4) disclosure requirements;
(5) prohibited practices relating to:
(A) unfair discrimination in the provision of life or viatical settlements; and
(B) referral fees paid by persons engaged in the business of life or viatical settlements;
(6) assignment or resale of life insurance policies;
(7) maintenance of appropriate confidentiality of personal and medical information; and
(8) the responsibility of a registrant to ensure compliance with this subchapter and rules relating to life or viatical settlements after the registration is revoked, suspended, or otherwise lapses.
(c) The commissioner may not adopt a rule establishing a price or fee for the transfer of a life settlement. This subsection does not prohibit the commissioner from adopting a rule relating to an unjust price or fee for the transfer of a life settlement.
(d) The commissioner may not adopt a rule that regulates the actions of an investor providing money to a life or viatical settlement company. (V.T.I.C. Art. 3.50-6A, Secs. 2(b), (c), (e), (f).)
Sec. 1111.004. ANNUAL FEE FOR REGISTRATION. The commissioner may adopt rules requiring payment of an annual fee in connection with registration. The fee may not exceed $250. (V.T.I.C. Art. 3.50-6A, Sec. 2(d).)
Sec. 1111.005. DENIAL, SUSPENSION, OR REVOCATION OF REGISTRATION; ENFORCEMENT. (a) The commissioner may suspend or revoke a registration or deny an application for registration if the commissioner determines that the registrant or applicant, individually or through any officer, director, or shareholder of the registrant or applicant:
(1) wilfully violated:
(A) this subchapter;
(B) an applicable provision of this code or another insurance law of this state; or
(C) a rule adopted under a law described by Paragraph (A) or (B);
(2) intentionally made a material misstatement in the application for registration;
(3) obtained or attempted to obtain registration by fraud or misrepresentation;
(4) misappropriated, converted to the registrant's or applicant's own use, or illegally withheld money belonging to a party to a life or viatical settlement;
(5) was guilty of fraudulent or dishonest practices;
(6) materially misrepresented the terms of business conducted under this subchapter or any other provision of this code or another insurance law of this state;
(7) made or issued, or caused to be made or issued, a statement materially misrepresenting or making incomplete comparisons regarding the material terms of any business conducted under this subchapter; or
(8) was convicted of a felony or of a misdemeanor involving moral turpitude or fraud.
(b) An applicant or registrant whose registration has been denied, suspended, or revoked under this section may not file another application for registration before the first anniversary of the effective date of the denial, suspension, or revocation or, if judicial review of the denial, suspension, or revocation is sought, the first anniversary of the date of the final court order or decree affirming the action. The commissioner may deny an application filed after that period unless the applicant shows good cause why the denial, suspension, or revocation of the previous registration should not bar the issuance of a new registration.
(c) In addition to an action taken against a person under Subsection (a) or (b), the commissioner may take against the person any action that the commissioner may take against a person engaged in the business of insurance who violates a statute or rule. (V.T.I.C. Art. 3.50-6A, Sec. 4.)
Sec. 1111.006. APPLICABILITY OF OTHER INSURANCE LAWS. The following laws apply to a person engaged in the business of life or viatical settlements:
(1) Articles 1.10, 1.10D, 1.19, and 21.21;
(2) Chapters 82, 83, and 84;
(3) Sections 31.002, 32.001, 32.002, 32.003, 32.021, 32.023, 32.041, 38.001, 81.004, 801.056, and 862.052; and
(4) Subchapter C, Chapter 36. (V.T.I.C. Art. 3.50-6A, Sec. 3.)
[Sections 1111.007-1111.050 reserved for expansion]
SUBCHAPTER B. ACCELERATED TERM LIFE INSURANCE BENEFITS
Sec. 1111.051. DEFINITIONS. In this subchapter:
(1) "Accelerated benefit" means a benefit paid to an insured instead of a portion of a death benefit.
(2) "Death benefit" means a benefit payable to a beneficiary on the death of an insured.
(3) "Long-term care illness" means an illness or physical condition that results in the inability to perform the activities of daily life or the substantial and material duties of any occupation.
(4) "Terminal illness" means an illness or physical condition, including a physical injury, that can reasonably be expected to result in death within not more than two years. (V.T.I.C. Art. 3.50-6, Secs. (a)(1), (2), (3), (5).)
Sec. 1111.052. AUTHORITY TO PAY ACCELERATED TERM LIFE BENEFITS. An insurer may pay an accelerated benefit under an individual or group term life insurance policy or certificate if:
(1) the insurer has received a written medical opinion, satisfactory to the insurer, that the insured has:
(A) a terminal illness;
(B) a long-term care illness; or
(C) an illness or physical condition that is likely to cause permanent disability or premature death, including:
(i) acquired immune deficiency syndrome (AIDS);
(ii) a malignant tumor;
(iii) a condition that requires an organ transplant; or
(iv) a coronary artery disease that results in acute infarction or requires surgery; and
(2) the amount of the accelerated benefit is deducted from:
(A) the amount of the death benefit payable under the policy or certificate; and
(B) any amount the insured would otherwise be entitled to convert to an individual contract. (V.T.I.C. Art. 3.50-6, Secs. (a)(4), (b).)
Sec. 1111.053. RULES. The commissioner may adopt rules to implement this subchapter. (V.T.I.C. Art. 3.50-6, Sec. (c).)
[Chapters 1112-1130 reserved for expansion]
SUBTITLE B. GROUP LIFE INSURANCE
CHAPTER 1131. GROUP LIFE INSURANCE
AND FRANCHISE LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1131.001. DEFINITION
Sec. 1131.002. CERTAIN GROUP LIFE INSURANCE AUTHORIZED
Sec. 1131.003. CERTAIN FRANCHISE LIFE INSURANCE AUTHORIZED
Sec. 1131.004. FORFEITURE OF CERTIFICATE OF AUTHORITY FOR
UNAUTHORIZED GROUP LIFE INSURANCE CONTRACT
Sec. 1131.005. GUARANTEEING ISSUANCE OF LIFE INSURANCE POLICY
WITHOUT EVIDENCE OF INSURABILITY
Sec. 1131.006. ASSIGNMENT OF BENEFITS
[Sections 1131.007-1131.050 reserved for expansion]
SUBCHAPTER B. GROUP AND FRANCHISE LIFE INSURANCE: ELIGIBLE
POLICYHOLDERS
Sec. 1131.051. EMPLOYERS
Sec. 1131.052. LABOR UNIONS
Sec. 1131.053. FUNDS ESTABLISHED BY EMPLOYERS OR LABOR UNIONS
Sec. 1131.054. GOVERNMENTAL ENTITIES OR ASSOCIATIONS OF PUBLIC
EMPLOYEES
Sec. 1131.055. SPOUSES AND CHILDREN OF EMPLOYEES OF UNITED
STATES
Sec. 1131.056. PRINCIPALS
Sec. 1131.057. CREDITORS
Sec. 1131.058. VETERANS' LAND BOARD
Sec. 1131.059. ASSOCIATIONS OR TRUSTS FOR PAYMENT OF FUNERAL
EXPENSES
Sec. 1131.060. NONPROFIT ORGANIZATIONS OR ASSOCIATIONS
[Sections 1131.061-1131.063 reserved for expansion]
Sec. 1131.064. OTHER GROUPS
Sec. 1131.065. FRANCHISE LIFE INSURANCE
[Sections 1131.066-1131.100 reserved for expansion]
SUBCHAPTER C. GROUP LIFE INSURANCE:
REQUIRED PROVISIONS
Sec. 1131.101. REQUIRED PROVISIONS
Sec. 1131.102. NONFORFEITURE
Sec. 1131.103. GRACE PERIOD
Sec. 1131.104. INCONTESTABILITY OF POLICY
Sec. 1131.105. APPLICATION FOR POLICY; STATEMENTS OF
INSURED
Sec. 1131.106. EVIDENCE OF INSURABILITY
Sec. 1131.107. ADJUSTMENT OF PREMIUMS OR BENEFITS IF
AGE OF INSURED IS MISSTATED
Sec. 1131.108. INSURANCE CERTIFICATE
Sec. 1131.109. PERSON TO WHOM BENEFITS ARE PAYABLE
Sec. 1131.110. RIGHT TO INDIVIDUAL POLICY ON TERMINATION OF
EMPLOYMENT OR MEMBERSHIP
Sec. 1131.111. RIGHT TO INDIVIDUAL POLICY ON TERMINATION OF
COVERAGE UNDER GROUP POLICY
Sec. 1131.112. PAYMENT OF BENEFITS ON DEATH OF INSURED
BEFORE INDIVIDUAL POLICY BECOMES
EFFECTIVE
[Sections 1131.113-1131.150 reserved for expansion]
SUBCHAPTER D. GROUP LIFE INSURANCE:
OPTIONAL PROVISIONS
Sec. 1131.151. CONTINUATION OF BENEFITS FOR FAMILY MEMBERS
AFTER DEATH OF INSURED
[Sections 1131.152-1131.200 reserved for expansion]
SUBCHAPTER E. GROUP LIFE INSURANCE POLICIES ISSUED TO
EMPLOYERS: ADDITIONAL REQUIREMENTS
Sec. 1131.201. APPLICABILITY OF SUBCHAPTER
Sec. 1131.202. ELIGIBLE EMPLOYEES
Sec. 1131.203. PAYMENT OF PREMIUMS
Sec. 1131.204. MINIMUM ENROLLMENT
Sec. 1131.205. AMOUNTS OF INSURANCE
[Sections 1131.206-1131.250 reserved for expansion]
SUBCHAPTER F. GROUP LIFE INSURANCE POLICIES ISSUED
TO FUNDS ESTABLISHED BY EMPLOYERS
OR LABOR UNIONS: ADDITIONAL REQUIREMENTS
Sec. 1131.251. APPLICABILITY OF SUBCHAPTER
Sec. 1131.252. ELIGIBLE EMPLOYEES OR MEMBERS
Sec. 1131.253. PAYMENT OF PREMIUMS
Sec. 1131.254. MINIMUM ENROLLMENT
Sec. 1131.255. AMOUNTS OF INSURANCE
[Sections 1131.256-1131.300 reserved for expansion]
SUBCHAPTER G. GROUP LIFE INSURANCE POLICIES ISSUED TO
GOVERNMENTAL ENTITIES OR ASSOCIATIONS OF
PUBLIC EMPLOYEES: ADDITIONAL REQUIREMENTS
Sec. 1131.301. APPLICABILITY OF SUBCHAPTER
Sec. 1131.302. ELIGIBLE EMPLOYEES OR MEMBERS
Sec. 1131.303. PAYMENT OF PREMIUMS
Sec. 1131.304. MINIMUM ENROLLMENT
[Sections 1131.305-1131.350 reserved for expansion]
SUBCHAPTER H. GROUP TERM LIFE INSURANCE POLICIES
EXTENDED TO SPOUSES AND CHILDREN OF EMPLOYEES OF
UNITED STATES: ADDITIONAL REQUIREMENTS
Sec. 1131.351. APPLICABILITY OF SUBCHAPTER
Sec. 1131.352. PAYMENT OF PREMIUMS
Sec. 1131.353. AMOUNTS OF INSURANCE
Sec. 1131.354. CONVERSION RIGHTS
Sec. 1131.355. CERTIFICATE OF INSURANCE
[Sections 1131.356-1131.400 reserved for expansion]
SUBCHAPTER I. GROUP LIFE INSURANCE POLICIES
ISSUED TO PRINCIPALS: ADDITIONAL REQUIREMENTS
Sec. 1131.401. APPLICABILITY OF SUBCHAPTER
Sec. 1131.402. ELIGIBLE AGENTS
Sec. 1131.403. PAYMENT OF PREMIUMS
Sec. 1131.404. MINIMUM ENROLLMENT
Sec. 1131.405. AMOUNTS OF INSURANCE
[Sections 1131.406-1131.450 reserved for expansion]
SUBCHAPTER J. GROUP LIFE INSURANCE POLICIES ISSUED TO
CREDITORS: ADDITIONAL REQUIREMENTS
Sec. 1131.451. APPLICABILITY OF SUBCHAPTER
Sec. 1131.452. ELIGIBLE DEBTORS
Sec. 1131.453. PAYMENT OF PREMIUMS
Sec. 1131.454. MINIMUM ENROLLMENT
Sec. 1131.455. AMOUNT OF INSURANCE
Sec. 1131.456. PAYMENT OF PROCEEDS
Sec. 1131.457. ANNUITIES AND ENDOWMENT INSURANCE
PROHIBITED
[Sections 1131.458-1131.500 reserved for expansion]
SUBCHAPTER K. GROUP LIFE INSURANCE POLICIES ISSUED TO
NONPROFIT ORGANIZATIONS OR ASSOCIATIONS: ADDITIONAL
REQUIREMENTS
Sec. 1131.501. APPLICABILITY OF SUBCHAPTER
Sec. 1131.502. ELIGIBLE MEMBERS
Sec. 1131.503. PAYMENT OF PREMIUMS
Sec. 1131.504. MINIMUM ENROLLMENT
Sec. 1131.505. AMOUNTS OF INSURANCE
[Sections 1131.506-1131.700 reserved for expansion]
SUBCHAPTER O. GROUP LIFE INSURANCE POLICIES ISSUED TO OTHER
GROUPS: ADDITIONAL REQUIREMENTS
Sec. 1131.701. APPLICABILITY OF SUBCHAPTER
Sec. 1131.702. PAYMENT OF PREMIUMS
Sec. 1131.703. INSURANCE FOR LIABILITIES RELATED TO
FRINGE BENEFITS
[Sections 1131.704-1131.750 reserved for expansion]
SUBCHAPTER P. FRANCHISE LIFE INSURANCE POLICIES: ADDITIONAL
REQUIREMENTS
Sec. 1131.751. APPLICABILITY OF SUBCHAPTER
Sec. 1131.752. PAYMENT OF PREMIUMS
Sec. 1131.753. MINIMUM ENROLLMENT
Sec. 1131.754. AMOUNT OF INSURANCE
Sec. 1131.755. INDIVIDUAL APPLICATION REQUIRED
Sec. 1131.756. RIGHT TO INDIVIDUAL POLICY ON TERMINATION
OF EMPLOYMENT OR MEMBERSHIP
Sec. 1131.757. OPTIONAL POLICY PROVISIONS
Sec. 1131.758. CERTAIN POLICIES AND PLANS UNAFFECTED
[Sections 1131.759-1131.800 reserved for expansion]
SUBCHAPTER Q. EXTENSION OF GROUP LIFE INSURANCE
TO SPOUSES AND CHILDREN
Sec. 1131.801. APPLICABILITY OF SUBCHAPTER
Sec. 1131.802. EXTENSION OF GROUP LIFE INSURANCE TO
SPOUSES AND CHILDREN; ELIGIBLE
CHILDREN
Sec. 1131.803. PAYMENT OF PREMIUMS
Sec. 1131.804. AMOUNTS OF INSURANCE
Sec. 1131.805. CONVERSION RIGHTS
Sec. 1131.806. CERTIFICATE OF INSURANCE
[Sections 1131.807-1131.850 reserved for expansion]
SUBCHAPTER R. CONTINUATION OF CERTAIN GROUP LIFE
INSURANCE DURING LABOR DISPUTE
Sec. 1131.851. APPLICABILITY OF SUBCHAPTER
Sec. 1131.852. CONTINUATION OF GROUP LIFE INSURANCE
DURING LABOR DISPUTE REQUIRED FOR
CERTAIN POLICIES
Sec. 1131.853. CONTRIBUTIONS IF POLICYHOLDER IS TRUSTEE
Sec. 1131.854. CONTRIBUTIONS IF POLICYHOLDER IS NOT
TRUSTEE
Sec. 1131.855. PAYMENT OF CONTRIBUTION AND PREMIUM
Sec. 1131.856. PAST DUE PREMIUM
Sec. 1131.857. INDIVIDUAL PREMIUM RATE INCREASE
Sec. 1131.858. PREMIUM RATE CHANGE NOT LIMITED
Sec. 1131.859. LIMITATIONS ON CONTINUATION OF COVERAGE
Sec. 1131.860. OTHER PROVISIONS; COMMISSIONER APPROVAL
REQUIRED
CHAPTER 1131. GROUP LIFE INSURANCE
AND FRANCHISE LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1131.001. DEFINITION. In this chapter, "franchise life insurance" means a term life insurance plan under which a number of individual term life insurance policies are issued to a selected group at a rate that is lower than the rate shown in the issuing insurer's manual for an individually issued policy of the same type issued to an insured of the same class. (V.T.I.C. Art. 3.50, Sec. 1(7)(a).)
Sec. 1131.002. CERTAIN GROUP LIFE INSURANCE AUTHORIZED. A group life insurance policy may be delivered in this state only if the policy:
(1) covers a group described by Subchapter B; and
(2) complies with this chapter. (V.T.I.C. Art. 3.50, Secs. 1(intro), 3 (part).)
Sec. 1131.003. CERTAIN FRANCHISE LIFE INSURANCE AUTHORIZED. A franchise life insurance policy may be issued or delivered in this state only if the policy:
(1) covers a group described by Section 1131.065; and
(2) complies with Subchapter P. (V.T.I.C. Art. 3.50, Sec. 1(7)(intro).)
Sec. 1131.004. FORFEITURE OF CERTIFICATE OF AUTHORITY FOR UNAUTHORIZED GROUP LIFE INSURANCE CONTRACT. The certificate of authority to engage in the business of insurance in this state of an insurer that enters into a group life insurance contract other than as authorized by this chapter may be forfeited by an action brought for that purpose by the attorney general at the department's request. (V.T.I.C. Art. 3.50, Sec. 3 (part).)
Sec. 1131.005. GUARANTEEING ISSUANCE OF LIFE INSURANCE POLICY WITHOUT EVIDENCE OF INSURABILITY. (a) In this section, "qualified pension or profit-sharing plan" means a plan that meets the requirements of:
(1) Section 401 or 403, Internal Revenue Code of 1986, and their subsequent amendments; or
(2) any corresponding provisions of prior or subsequent United States revenue laws.
(b) This code does not prohibit a life insurance company authorized to engage in the business of insurance in this state from guaranteeing to issue individual life insurance policies insuring participants in a qualified pension or profit-sharing plan on other than the term plan without evidence of insurability. (V.T.I.C. Art. 3.50-1.)
Sec. 1131.006. ASSIGNMENT OF BENEFITS. (a) Subject to the terms of a group life insurance policy, an insured under the policy may make to any individual, firm, corporation, association, trust, or other legal entity, other than the insured's employer, an absolute or collateral assignment of all rights and benefits conferred on the insured by the policy or by Subchapter C.
(b) Subsection (a) applies without regard to the date a policy is issued.
(c) Subject to the terms of the policy, an assignment by an insured before September 1, 1969, is valid for the purpose of vesting in the assignee all assigned rights and privileges but without prejudice to the insurer because of any payment the insurer makes or individual policy the insurer issues before receiving notice of the assignment. (V.T.I.C. Art. 3.50, Sec. 2(intro) (part).)
[Sections 1131.007-1131.050 reserved for expansion]
SUBCHAPTER B. GROUP AND FRANCHISE LIFE INSURANCE: ELIGIBLE
POLICYHOLDERS
Sec. 1131.051. EMPLOYERS. (a) A group life insurance policy may be issued to an employer or to trustees of a fund established by an employer to insure the employer's employees for the benefit of persons other than the employer.
(b) A policy to which this section applies may provide that "employee" includes:
(1) an individual proprietor or partner, if the employer is an individual proprietorship or partnership;
(2) an employee of a subsidiary corporation of the employer;
(3) an employee, individual proprietor, or partner of an affiliated corporation, proprietorship, or partnership, if the business of the employer and the affiliated corporation, proprietorship, or partnership is under common control through stock ownership, contract, or otherwise; or
(4) a retired employee.
(c) The employer or the trustees of a fund established by an employer are the policyholder under a policy to which this section applies.
(d) A policy to which this section applies is subject to Subchapter E. (V.T.I.C. Art. 3.50, Secs. 1(1)(intro), (a) (part).)
Sec. 1131.052. LABOR UNIONS. (a) A group life insurance policy may be issued to a labor union to insure the union's members who are actively engaged in the same occupation.
(b) For purposes of this chapter:
(1) a labor union is considered to be an employer; and
(2) a member of a labor union is considered to be an employee of the union.
(c) The labor union is the policyholder under a policy to which this section applies. (V.T.I.C. Art. 3.50, Sec. 1(2).)
Sec. 1131.053. FUNDS ESTABLISHED BY EMPLOYERS OR LABOR UNIONS. (a) A group life insurance policy may be issued to insure the employers' employees or the unions' members for the benefit of persons other than the employers or unions to the trustees of a fund established by:
(1) two or more employers in the same industry;
(2) one or more labor unions;
(3) one or more employers in the same industry and one or more labor unions; or
(4) one or more employers and one or more labor unions whose members are in the same or related occupations or trades.
(b) A policy to which this section applies may provide that "employee" includes:
(1) an individual proprietor or partner, if the employer is an individual proprietorship or partnership;
(2) a trustee, an employee of the trustee, or both, if the person's duties are principally connected with the trusteeship; or
(3) a retired employee.
(c) The trustees are the policyholder under a policy to which this section applies.
(d) A policy may not be issued under this section to insure employees of:
(1) an employer whose eligibility to participate in the fund as an employer arises out of considerations directly related to the employer being a commercial correspondent or business client or patron of another employer, without regard to whether the other employer participates in the fund; or
(2) an employer that is not located in this state, unless:
(A) the majority of the employers whose employees are to be insured are located in this state; or
(B) the policy is issued to the trustees of a fund established by one or more labor unions.
(e) A policy to which this section applies is subject to Subchapter F. (V.T.I.C. Art. 3.50, Secs. 1(5)(intro), (a) (part), (f).)
Sec. 1131.054. GOVERNMENTAL ENTITIES OR ASSOCIATIONS OF PUBLIC EMPLOYEES. (a) In this section, "employee" includes an elected or appointed officer of the state.
(b) A group life insurance policy may be issued to a governmental entity or an association of public employees listed in Subsection (c) to insure the governmental entity's employees or the association's members for the benefit of persons other than the governmental entity or association.
(c) This section authorizes issuance of a group life insurance policy to:
(1) a municipality, independent school district, or common school district;
(2) a department of state government;
(3) a state college or university; or
(4) an association of public employees, including an association of:
(A) employees of the United States government, if the majority of the members of the association reside in this state;
(B) state employees; or
(C) any combination of state, county, and municipal employees.
(d) The governmental entity or association is the policyholder under a policy to which this section applies.
(e) A policy to which this section applies is subject to Subchapter G. (V.T.I.C. Art. 3.50, Secs. 1(3)(intro), (d).)
Sec. 1131.055. SPOUSES AND CHILDREN OF EMPLOYEES OF UNITED STATES. (a) A group term life insurance policy may be extended, in the form of group term life insurance only, to insure the spouse and natural or adopted minor children of an insured employee of the United States government if:
(1) the policy constitutes a part of the employee benefit program established for the benefit of employees of the United States government; and
(2) the spouse or children of other employees covered by the same employee benefit program in other states are or may be covered by group term life insurance.
(b) A policy to which this section applies is subject to Subchapter H. (V.T.I.C. Art. 3.50, Sec. 1(9)(intro).)
Sec. 1131.056. PRINCIPALS. (a) In this section, "agent" includes a general agent, subagent, or salesperson.
(b) A group life insurance policy may be issued to a principal, or if the principal is a life, life and accident, or life, accident, and health insurer, by or to the principal, to insure the principal's agents for the benefit of persons other than the principal.
(c) A policy to which this section applies is subject to Subchapter I. (V.T.I.C. Art. 3.50, Secs. 1(7A)(intro) (part), (a), (e).)
Sec. 1131.057. CREDITORS. (a) A group life insurance policy may be issued to a creditor to insure the creditor's debtors.
(b) The creditor is the policyholder under a policy to which this section applies.
(c) A policy to which this section applies is subject to Subchapter J. (V.T.I.C. Art. 3.50, Sec. 1(4)(intro).)
Sec. 1131.058. VETERANS' LAND BOARD. (a) A group life insurance policy may be issued to the Veterans' Land Board to insure persons purchasing land under the Veterans' Land Program as provided by Subchapter I, Chapter 161, Natural Resources Code.
(b) The Veterans' Land Board is the policyholder under a policy to which this section applies. (V.T.I.C. Art. 3.50, Sec. 1(8).)
Sec. 1131.059. ASSOCIATIONS OR TRUSTS FOR PAYMENT OF FUNERAL EXPENSES. A group life insurance policy may be issued to an association or trust for a group of individuals for the payment of future funeral expenses. (V.T.I.C. Art. 3.50, Sec. 1(5A).)
Sec. 1131.060. NONPROFIT ORGANIZATIONS OR ASSOCIATIONS. (a) A group life insurance policy may be issued to a nonprofit service, civic, fraternal, or community organization or association to insure the organization's or association's members and employees for the benefit of persons other than the organization or association or an officer of the organization or association.
(b) To be eligible to obtain a group life insurance policy under this section, an organization or association must:
(1) have a constitution or bylaws;
(2) have actively existed for at least two years; and
(3) have been formed for purposes other than that of obtaining insurance.
(c) The organization or association is the policyholder under a policy to which this section applies.
(d) A policy to which this section applies is subject to Subchapter K. (V.T.I.C. Art. 3.50, Sec. 1(10)(intro).)
[Sections 1131.061-1131.063 reserved for expansion]
Sec. 1131.064. OTHER GROUPS. (a) A group life insurance policy may be issued to cover a group other than a group described by Sections 1131.051-1131.060 if the commissioner finds that:
(1) the issuance of the policy is not contrary to the best interest of the public;
(2) the issuance of the policy would result in economies of acquisition or administration; and
(3) the benefits are reasonable in relation to the premiums charged.
(b) Group life insurance coverage may not be offered under this section in this state by an insurer under a policy issued in another state unless this state or another state having requirements substantially similar to those prescribed by Subsections (a)(1)-(3) has determined that those requirements have been met.
(c) A policy to which this section applies is subject to Subchapter O. (V.T.I.C. Art. 3.50, Secs. 1(6)(intro), (a), (b).)
Sec. 1131.065. FRANCHISE LIFE INSURANCE. (a) Policies of franchise life insurance may be issued to:
(1) the employees of a common employer or employers;
(2) the members of one or more labor unions; or
(3) the members of one or more credit unions.
(b) A policy to which this section applies is subject to Subchapter P. (V.T.I.C. Art. 3.50, Sec. 1(7)(b) (part).)
[Sections 1131.066-1131.100 reserved for expansion]
SUBCHAPTER C. GROUP LIFE INSURANCE:
REQUIRED PROVISIONS
Sec. 1131.101. REQUIRED PROVISIONS. (a) A group life insurance policy may not be delivered in this state unless the policy contains in substance the provisions prescribed by this subchapter or provisions in relation to provisions prescribed by this subchapter that, in the opinion of the commissioner, are:
(1) more favorable to an insured under the policy; or
(2) at least as favorable to an insured under the policy and more favorable to the policyholder.
(b) The standard provisions required for individual life insurance policies do not apply to group life insurance policies. (V.T.I.C. Art. 3.50, Sec. 2(intro) (part).)
Sec. 1131.102. NONFORFEITURE. (a) A group life insurance policy other than a group term life insurance policy must contain nonforfeiture provisions that, in the commissioner's opinion, are equitable to the insured and the policyholder.
(b) This section does not require that a group life insurance policy contain the same nonforfeiture provisions as required for an individual life insurance policy. (V.T.I.C. Art. 3.50, Sec. 2(intro) (part).)
Sec. 1131.103. GRACE PERIOD. (a) A group life insurance policy must provide that the policyholder or premium payor is entitled to a grace period of 31 days for the payment of any premium, other than the first, due under the policy. During the grace period, the death benefit coverage continues in force unless the policyholder or premium payor gives the insurer written notice of discontinuance before the date of discontinuance and in accordance with the policy.
(b) The policy may provide that the policyholder or premium payor is liable to the insurer for payment of a pro rata premium for the time the policy was in force during a grace period. (V.T.I.C. Art. 3.50, Sec. 2(1).)
Sec. 1131.104. INCONTESTABILITY OF POLICY. A group life insurance policy must provide that:
(1) the validity of the policy may not be contested, except for nonpayment of premiums, after the policy has been in force for two years after its date of issue; and
(2) a statement made by any insured under the policy relating to the insured's insurability may not be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force before the contest for a period of two years during the insured's lifetime and unless the statement is contained in a written instrument signed by the insured making the statement. (V.T.I.C. Art. 3.50, Sec. 2(2).)
Sec. 1131.105. APPLICATION FOR POLICY; STATEMENTS OF INSURED. A group life insurance policy must provide that:
(1) a copy of any application for the policy by the policyholder must be attached to the policy when issued;
(2) a statement made by the policyholder or an insured is considered a representation and not a warranty; and
(3) a statement made by an insured may not be used in any contest under the policy unless a copy of the instrument containing the statement is or has been furnished to the person or the person's beneficiary. (V.T.I.C. Art. 3.50, Sec. 2(3).)
Sec. 1131.106. EVIDENCE OF INSURABILITY. A group life insurance policy must state the conditions, if any, under which the insurer reserves the right to require an individual eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition of obtaining part or all of the coverage. (V.T.I.C. Art. 3.50, Sec. 2(4).)
Sec. 1131.107. ADJUSTMENT OF PREMIUMS OR BENEFITS IF AGE OF INSURED IS MISSTATED. (a) A group life insurance policy must specify an equitable adjustment of premiums, benefits, or both, to be made if the age of an insured has been misstated.
(b) The provision required by Subsection (a) must contain a clear statement of the method of adjustment to be used.
(c) This section does not apply to a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(5).)
Sec. 1131.108. INSURANCE CERTIFICATE. (a) A group life insurance policy must provide that the insurer will issue to the policyholder for delivery to each insured an individual certificate stating:
(1) the insurance protection to which the insured is entitled;
(2) to whom the insurance benefits are payable; and
(3) the rights and conditions specified by Sections 1131.110-1131.112.
(b) This section does not apply to:
(1) a policy issued to a creditor to insure the creditor's debtors; or
(2) a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(intro) (part), (7).)
Sec. 1131.109. PERSON TO WHOM BENEFITS ARE PAYABLE. (a) A group life insurance policy must provide that any amount due because of an insured's death must be paid to the beneficiary designated by the insured or the beneficiary's assignee, subject to:
(1) the provisions of the policy, if the designated beneficiary as to all or any part of the amount is not living at the time the insured dies; and
(2) any right reserved by the insurer in the policy and stated in the certificate to pay at the insurer's option a portion of the amount not to exceed $250 to any person the insurer determines is equitably entitled to the portion because of having incurred funeral or other expenses incident to the last illness or death of the insured.
(b) This section does not apply to:
(1) a policy issued to a creditor to insure the creditor's debtors; or
(2) a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(intro) (part), (6).)
Sec. 1131.110. RIGHT TO INDIVIDUAL POLICY ON TERMINATION OF EMPLOYMENT OR MEMBERSHIP. (a) A group life insurance policy must provide that if any portion of the insurance on an individual insured under the policy ceases because the individual's employment or membership in the class or classes eligible for coverage under the policy terminates, the individual is entitled to have the insurer issue to the individual an individual life insurance policy without disability or other supplementary benefits.
(b) An individual policy under this section must be issued without evidence of insurability.
(c) An individual must apply for an individual policy and pay the first premium to the insurer not later than the 31st day after the date the individual's employment or membership terminates.
(d) The insured may select any individual policy, other than a term life insurance policy, customarily issued by the insurer for an individual of the insured's age and for the amount requested.
(e) Except as provided by Subsection (f), the individual policy must be in an amount not to exceed the amount of life insurance that ceases because of the termination of employment or membership.
(f) For purposes of Subsection (e), any amount of insurance that, on or before the date of the termination of employment or membership, has matured as an endowment payable to the insured is not included in the amount that is considered to cease because of the termination. This subsection applies without regard to whether the endowment is payable in full, in installments, or in the form of an annuity.
(g) The premium on an individual policy must be at the insurer's then customary rate applicable to:
(1) the form and amount of the individual policy;
(2) the class of risk to which the insured then belongs; and
(3) the insured's age on the effective date of the individual policy.
(h) This section does not apply to:
(1) a policy issued to a creditor to insure the creditor's debtors; or
(2) a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(intro) (part), (8).)
Sec. 1131.111. RIGHT TO INDIVIDUAL POLICY ON TERMINATION OF COVERAGE UNDER GROUP POLICY. (a) A group life insurance policy must provide that if the policy terminates or is amended so as to terminate the insurance of a class of insured individuals, each individual insured under the policy on the date of the termination or amendment whose insurance terminates and who has been insured under the policy for at least five years before the date of the termination or amendment is entitled to have the insurer issue to the individual an individual life insurance policy, subject to the conditions and limitations provided by Section 1131.110.
(b) Notwithstanding Section 1131.110(e), a group life insurance policy may provide that the amount of an individual policy issued under this section may not exceed the lesser of:
(1) the amount of the individual's life insurance coverage that ceases because of the termination or amendment of the group policy, less the amount of any life insurance for which the individual is or becomes eligible under any group policy issued or reinstated by the same or another insurer before the 31st day after the date of the termination or amendment; or
(2) $2,000.
(c) This section does not apply to:
(1) a policy issued to a creditor to insure the creditor's debtors; or
(2) a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(intro) (part), (9).)
Sec. 1131.112. PAYMENT OF BENEFITS ON DEATH OF INSURED BEFORE INDIVIDUAL POLICY BECOMES EFFECTIVE. (a) A group life insurance policy must provide that if an individual insured under the group policy dies during the period within which the individual would have been entitled to have an individual policy issued as provided by Section 1131.110 or 1131.111 and before such an individual policy takes effect, the amount of life insurance that the individual would have been entitled to have issued to the individual under the individual policy is payable as a claim under the group policy.
(b) This section applies without regard to whether:
(1) the application for the individual policy has been made; or
(2) the first premium for the individual policy has been paid.
(c) This section does not apply to:
(1) a policy issued to a creditor to insure the creditor's debtors; or
(2) a policy to which Section 1131.703 applies. (V.T.I.C. Art. 3.50, Secs. 1(6)(d) (part); 2(intro) (part), (10).)
[Sections 1131.113-1131.150 reserved for expansion]
SUBCHAPTER D. GROUP LIFE INSURANCE:
OPTIONAL PROVISIONS
Sec. 1131.151. CONTINUATION OF BENEFITS FOR FAMILY MEMBERS AFTER DEATH OF INSURED. (a) A group life insurance policy that provides for the insurer to pay benefits for members of the family or dependents of an individual in the insured group may provide for a continuation of any part of those benefits after the death of the individual in the insured group.
(b) Any amounts of insurance provided by benefits under Subsection (a) are not considered to be life insurance for the purpose of determining the maximum amount of term insurance that may be issued on any one life. (V.T.I.C. Art. 3.50, Sec. 6.)
[Sections 1131.152-1131.200 reserved for expansion]
SUBCHAPTER E. GROUP LIFE INSURANCE POLICIES ISSUED TO
EMPLOYERS: ADDITIONAL REQUIREMENTS
Sec. 1131.201. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.051. (V.T.I.C. Art. 3.50, Sec. 1(1)(intro) (part).)
Sec. 1131.202. ELIGIBLE EMPLOYEES. All employees of the employer, or all of any class or classes of employees determined by conditions relating to their employment, are eligible for insurance under the policy. (V.T.I.C. Art. 3.50, Sec. 1(1)(a) (part).)
Sec. 1131.203. PAYMENT OF PREMIUMS. (a) The policyholder must pay the premium for the policy:
(1) wholly from the employer's fund or funds contributed by the employer; or
(2) partly from funds described by Subdivision (1) and partly from funds contributed by the insured employees.
(b) An insurer may not issue a policy as to which the insured employees are to pay the entire premium. (V.T.I.C. Art. 3.50, Sec. 1(1)(b) (part).)
Sec. 1131.204. MINIMUM ENROLLMENT. (a) The policy must cover at least 10 employees on the date the policy is issued.
(b) A policy as to which the insured employees are to pay part of the premium may take effect only if at least 75 percent of the employees eligible on the date the policy takes effect, excluding any employees as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions.
(c) A policy as to which the insured employees do not pay any part of the premium must insure:
(1) all eligible employees; or
(2) all eligible employees except any employees as to whom evidence of individual insurability is not satisfactory to the insurer. (V.T.I.C. Art. 3.50, Secs. 1(1)(b) (part), (c).)
Sec. 1131.205. AMOUNTS OF INSURANCE. (a) The amounts of insurance under the policy must be based on a plan that precludes individual selection by the employees or by the employer or trustees.
(b) An insurer may not issue a policy that provides term life insurance on an employee that, together with any other term life insurance under any group life insurance policies issued to the employer or to the trustees of a fund established by the employer, exceeds $250,000, except that if the employee's annual compensation from the employer or employers multiplied by seven exceeds $250,000, the group term life insurance may not exceed that computed amount.
(c) Subsection (b) does not apply if:
(1) the policy provides group insurance on other than the term plan;
(2) the insurance is to be used to fund benefits under a pension or profit-sharing plan; and
(3) the amount of insurance does not exceed the amount required to provide, at the normal retirement date, the pension specified by the plan.
(d) Notwithstanding Subsection (b), a group policy that is issued by the same or another insurer to replace another group policy may provide term life insurance not to exceed the greater of:
(1) the amount provided by the policy that it replaces; or
(2) the amount provided by Subsection (b). (V.T.I.C. Art. 3.50, Sec. 1(1)(d).)
[Sections 1131.206-1131.250 reserved for expansion]
SUBCHAPTER F. GROUP LIFE INSURANCE POLICIES ISSUED
TO FUNDS ESTABLISHED BY EMPLOYERS
OR LABOR UNIONS: ADDITIONAL REQUIREMENTS
Sec. 1131.251. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.053. (V.T.I.C. Art. 3.50, Sec. 1(5)(intro) (part).)
Sec. 1131.252. ELIGIBLE EMPLOYEES OR MEMBERS. (a) The individuals eligible for insurance under the policy are:
(1) all employees of the employers and the employees of the trade association of those employers;
(2) all members of the labor union; or
(3) all of any class or classes of employees or members determined by conditions relating to their employment, to their membership in the unions, or both.
(b) A director of a corporate employer is not eligible for insurance under the policy unless the person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director.
(c) An individual proprietor or partner is not eligible for insurance under the policy unless the person is actively engaged in and devotes a substantial part of the person's time to conducting the business of the proprietorship or partnership. (V.T.I.C. Art. 3.50, Sec. 1(5)(a) (part).)
Sec. 1131.253. PAYMENT OF PREMIUMS. (a) Subject to Subsection (b), the policyholder must pay the premium for the policy:
(1) wholly from funds contributed by the employer or employers, the labor union or unions, or both; or
(2) partly from funds described by Subdivision (1) and partly from funds contributed by the insureds.
(b) An insured's contribution toward the cost of the insurance may not exceed 40 cents per month for each $1,000 of insurance coverage.
(c) The policy may provide that a participating employer or labor union may pay the premium directly to the insurer for the policy issued to the trustee. If payment is made as provided by this subsection, the employer or labor union is the premium payor for the insured employees or union members for that employer unit. (V.T.I.C. Art. 3.50, Sec. 1(5)(b) (part).)
Sec. 1131.254. MINIMUM ENROLLMENT. (a) The policy must cover at least 100 individuals on the date the policy is issued unless the policy is issued to the trustees of a fund established by:
(1) employers that have assumed obligations through a collective bargaining agreement and are participating in the fund to:
(A) comply with those obligations with regard to one or more classes of their employees who are covered by the collective bargaining agreement; or
(B) provide insurance benefits for other classes of their employees; or
(2) one or more labor unions.
(b) A policy as to which the insureds are to pay part of the premium from funds contributed specifically for their insurance may take effect only if at least 75 percent of the individuals of each participating employer unit who are eligible on the date the policy takes effect, excluding any individuals as to whom evidence of insurability is not satisfactory to the insurer, elect to make the required contributions.
(c) A policy as to which the insureds do not pay any part of the premium must insure:
(1) all eligible individuals; or
(2) all eligible individuals except any individuals as to whom evidence of individual insurability is not satisfactory to the insurer. (V.T.I.C. Art. 3.50, Secs. 1(5)(b) (part), (c).)
Sec. 1131.255. AMOUNTS OF INSURANCE. (a) The amounts of insurance under the policy must be based on a plan that precludes individual selection by the insureds or by the policyholder or employer.
(b) An insurer may not issue a policy that provides term life insurance on an employee that, together with any other term life insurance under any group life insurance policies issued to trustees or employers, exceeds $250,000, except that if the employee's annual compensation from the employer or employers multiplied by seven exceeds $250,000, the group term life insurance may not exceed that computed amount.
(c) Subsection (b) does not apply if:
(1) the policy provides group insurance on other than the term plan;
(2) the insurance is to be used to fund benefits under a pension plan; and
(3) the amount of insurance does not exceed the amount required to provide, at the normal retirement date, the pension specified by the plan.
(d) Notwithstanding Subsection (b), a group policy that is issued by the same or another insurer to replace another group policy may provide term life insurance not to exceed the greater of:
(1) the amount provided by the policy that it replaces; or
(2) the amount provided by Subsection (b). (V.T.I.C. Art. 3.50, Secs. 1(5)(d), (e).)
[Sections 1131.256-1131.300 reserved for expansion]
SUBCHAPTER G. GROUP LIFE INSURANCE POLICIES ISSUED TO
GOVERNMENTAL ENTITIES OR ASSOCIATIONS OF
PUBLIC EMPLOYEES: ADDITIONAL REQUIREMENTS
Sec. 1131.301. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.054. (V.T.I.C. Art. 3.50, Sec. 1(3)(intro) (part).)
Sec. 1131.302. ELIGIBLE EMPLOYEES OR MEMBERS. All employees of the employer or all members of the association are eligible for insurance under the policy. (V.T.I.C. Art. 3.50, Sec. 1(3)(a).)
Sec. 1131.303. PAYMENT OF PREMIUMS. (a) The premium for the policy may be paid wholly or partly from funds contributed by:
(1) the employer;
(2) the individuals insured under the policy; or
(3) the insured employees who are members of the association of employees.
(b) Any money or credits received by or allowed to the policyholder under any participation agreement contained in or issued in connection with the policy must be applied to the payment of future premiums and to the pro rata abatement of the insured employees' contribution for future premiums.
(c) The employer may deduct from an employee's salary the employee's contribution for the premiums if authorized to do so in writing by that employee. (V.T.I.C. Art. 3.50, Sec. 1(3)(b) (part).)
Sec. 1131.304. MINIMUM ENROLLMENT. (a) The policy must cover at least 10 employees or members on the date the policy is issued.
(b) A policy as to which the insured employees or members pay part of the premium may take effect only if at least 75 percent of the employees or members eligible on the date the policy takes effect, excluding any employees or members as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions. (V.T.I.C. Art. 3.50, Secs. 1(3)(b) (part), (c).)
[Sections 1131.305-1131.350 reserved for expansion]
SUBCHAPTER H. GROUP TERM LIFE INSURANCE POLICIES
EXTENDED TO SPOUSES AND CHILDREN OF EMPLOYEES OF
UNITED STATES: ADDITIONAL REQUIREMENTS
Sec. 1131.351. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group term life insurance policy extended to a group described by Section 1131.055. (V.T.I.C. Art. 3.50, Sec. 1(9)(intro) (part).)
Sec. 1131.352. PAYMENT OF PREMIUMS. The policyholder must pay the premium for the group term life insurance solely from funds contributed by the insured employees. (V.T.I.C. Art. 3.50, Sec. 1(9)(a).)
Sec. 1131.353. AMOUNTS OF INSURANCE. (a) The amounts of insurance under the policy must be based on a plan that precludes individual selection by the insured employees or by the policyholder.
(b) Group term life insurance on the life of an employee's spouse may not exceed the lesser of:
(1) $10,000; or
(2) one-half of the amount of insurance on the life of the insured employee under the group policy.
(c) Group term life insurance on the life of an employee's minor child may not exceed $2,000. (V.T.I.C. Art. 3.50, Sec. 1(9)(b).)
Sec. 1131.354. CONVERSION RIGHTS. On termination of group term life insurance coverage for a spouse insured under this subchapter because the insured employee's employment terminates or the employee dies, or because the group contract terminates, the spouse has the same conversion rights as to the group term life insurance on the spouse's life as the employee. (V.T.I.C. Art. 3.50, Sec. 1(9)(c).)
Sec. 1131.355. CERTIFICATE OF INSURANCE. Only one certificate of insurance issued for delivery to an insured employee is required if the certificate includes a statement concerning any dependent's coverage. (V.T.I.C. Art. 3.50, Sec. 1(9)(d).)
[Sections 1131.356-1131.400 reserved for expansion]
SUBCHAPTER I. GROUP LIFE INSURANCE POLICIES
ISSUED TO PRINCIPALS: ADDITIONAL REQUIREMENTS
Sec. 1131.401. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.056. (V.T.I.C. Art. 3.50, Sec. 1(7A)(intro) (part).)
Sec. 1131.402. ELIGIBLE AGENTS. Agents who are under contract to provide personal services for the principal for a commission or other fixed or ascertainable compensation, or any class or classes of those agents determined by conditions relating to the services the agents provide to the principal, are eligible for insurance under the policy. (V.T.I.C. Art. 3.50, Sec. 1(7A)(b).)
Sec. 1131.403. PAYMENT OF PREMIUMS. The premium for the policy must be paid:
(1) wholly by the principal; or
(2) partly from funds contributed by the principal and partly from funds contributed by the insured agents. (V.T.I.C. Art. 3.50, Sec. 1(7A)(c) (part).)
Sec. 1131.404. MINIMUM ENROLLMENT. (a) The policy must cover at least 10 agents on the date the policy is issued.
(b) Subject to Subsection (c), a policy as to which the insured agents pay part of the premium must cover, on the date the policy is issued, at least:
(1) 75 percent of the eligible agents; or
(2) 75 percent of any class or classes of eligible agents, determined by conditions relating to the services the agents provide to the principal.
(c) Benefits may be extended to another class of agents if 75 percent of the class request coverage.
(d) A policy as to which the insured agents do not pay any part of the premium must insure:
(1) all eligible agents; or
(2) all of any class or classes of eligible agents determined by conditions relating to the services the agents provide to the principal. (V.T.I.C. Art. 3.50, Secs. 1(7A)(intro) (part), (c) (part).)
Sec. 1131.405. AMOUNTS OF INSURANCE. (a) The amounts of insurance under the policy must be based on a plan that precludes individual selection by the agents or by the principal.
(b) An insurer may not issue a policy that provides term life insurance on an agent that, together with any other term life insurance under any group life insurance policies issued to the principal, exceeds $250,000, except that if the agent's annual commissions or other fixed or ascertainable compensation from the principal multiplied by seven exceeds $250,000, the group term life insurance may not exceed that computed amount. (V.T.I.C. Art. 3.50, Sec. 1(7A)(d).)
[Sections 1131.406-1131.450 reserved for expansion]
SUBCHAPTER J. GROUP LIFE INSURANCE POLICIES ISSUED TO CREDITORS:
ADDITIONAL REQUIREMENTS
Sec. 1131.451. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.057. (V.T.I.C. Art. 3.50, Sec. 1(4)(intro).)
Sec. 1131.452. ELIGIBLE DEBTORS. All individuals who become borrowers, or purchasers of securities, merchandise, or other property, under an agreement to pay the borrowed amount or to pay the balance of the price of the securities, merchandise, or other property purchased, are eligible for insurance under the policy. (V.T.I.C. Art. 3.50, Sec. 1(4)(a) (part).)
Sec. 1131.453. PAYMENT OF PREMIUMS. The policyholder must pay the premium for the policy from:
(1) the creditor's funds;
(2) charges collected from the insured debtors; or
(3) both the creditor's funds and charges collected from the insured debtors. (V.T.I.C. Art. 3.50, Sec. 1(4)(b).)
Sec. 1131.454. MINIMUM ENROLLMENT. The policy must cover at least 50 debtors at all times. (V.T.I.C. Art. 3.50, Sec. 1(4)(a) (part).)
Sec. 1131.455. AMOUNT OF INSURANCE. (a) Except as otherwise provided by this section, the amount of insurance on a debtor's life under the policy may not exceed the lesser of:
(1) the amount of the debtor's indebtedness;
(2) $50,000, if the indebtedness is not secured by a first lien on real estate; or
(3) $125,000, if the indebtedness is secured by a first lien on real estate.
(b) Subject to Subsections (c) and (d), the face amount of any loan or loan commitment, totally or partially executed, made to a debtor for educational purposes or to a debtor with seasonal income by a creditor in good faith for general agricultural or horticultural purposes, secured or unsecured, under which the debtor becomes personally liable for the payment of the loan, may be insured in an initial amount of insurance not to exceed the lesser of:
(1) the total amount payable under the contract of indebtedness; or
(2) $100,000 on any one life.
(c) If indebtedness described by Subsection (b) is payable in substantially equal installments, the amount of insurance may not at any time exceed the greater of the scheduled or actual amount of unpaid indebtedness.
(d) Insurance on a loan commitment described by Subsection (b) that does not exceed one year in duration may be written up to the amount of the loan commitment on a nondecreasing or level term plan but may not exceed $100,000 on any one life. (V.T.I.C. Art. 3.50, Sec. 1(4)(a) (part).)
Sec. 1131.456. PAYMENT OF PROCEEDS. (a) The proceeds of the insurance must be payable to the policyholder.
(b) Payment to the policyholder reduces or extinguishes the debtor's unpaid indebtedness to the extent of the payment. In the case of a debtor under a loan or loan commitment described by Section 1131.455(b), any insurance proceeds in excess of the indebtedness to the creditor are payable:
(1) to the debtor's estate; or
(2) under a facility of payment clause. (V.T.I.C. Art. 3.50, Sec. 1(4)(d).)
Sec. 1131.457. ANNUITIES AND ENDOWMENT INSURANCE PROHIBITED. The insurance issued may not include annuities or endowment insurance. (V.T.I.C. Art. 3.50, Sec. 1(4)(c).)
[Sections 1131.458-1131.500 reserved for expansion]
SUBCHAPTER K. GROUP LIFE INSURANCE POLICIES ISSUED TO
NONPROFIT ORGANIZATIONS OR ASSOCIATIONS: ADDITIONAL
REQUIREMENTS
Sec. 1131.501. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.060. (V.T.I.C. Art. 3.50, Sec. 1(10)(intro) (part).)
Sec. 1131.502. ELIGIBLE MEMBERS. All members of the organization or association, or all of any class of members determined by conditions relating to their membership in the organization or association, are eligible for insurance under the policy. (V.T.I.C. Art. 3.50, Sec. 1(10)(a).)
Sec. 1131.503. PAYMENT OF PREMIUMS. (a) The policyholder must pay the premium from:
(1) the policyholder's funds;
(2) funds contributed by the employees or members specifically for their insurance; or
(3) both the policyholder's funds and funds contributed by the employees or members.
(b) The policy may provide that the premium may be paid directly to the insurer by individual employees or members from their own funds. If the premium is paid as provided by this subsection, the respective employees or members become the premium payor for that particular certificate. (V.T.I.C. Art. 3.50, Sec. 1(10)(c).)
Sec. 1131.504. MINIMUM ENROLLMENT. The policy must cover at least 25 individuals on the date the policy is issued. (V.T.I.C. Art. 3.50, Sec. 1(10)(d).)
Sec. 1131.505. AMOUNTS OF INSURANCE. The amounts of insurance under the policy must be based on a plan that precludes individual selection by the insured members or by the organization or association. (V.T.I.C. Art. 3.50, Sec. 1(10)(b).)
[Sections 1131.506-1131.700 reserved for expansion]
SUBCHAPTER O. GROUP LIFE INSURANCE POLICIES ISSUED TO OTHER
GROUPS: ADDITIONAL REQUIREMENTS
Sec. 1131.701. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy issued to a group described by Section 1131.064. (V.T.I.C. Art. 3.50, Sec. 1(6)(intro).)
Sec. 1131.702. PAYMENT OF PREMIUMS. The premium for the policy must be paid from:
(1) the policyholder's funds;
(2) funds contributed by the insureds; or
(3) both the policyholder's funds and funds contributed by the insureds. (V.T.I.C. Art. 3.50, Sec. 1(6)(c).)
Sec. 1131.703. INSURANCE FOR LIABILITIES RELATED TO FRINGE BENEFITS. (a) Notwithstanding any other law, an employer may insure the lives of the employer's officers, directors, employees, and retired employees under Section 1131.064 to and in an amount necessary to provide funds to offset liabilities related to fringe benefits.
(b) An employer shall submit evidence of the purpose of the policy to the commissioner.
(c) A policy issued for the purpose described by this section does not reduce any other life insurance benefits offered or provided by the employer. (V.T.I.C. Art. 3.50, Sec. 1(6)(d) (part).)
[Sections 1131.704-1131.750 reserved for expansion]
SUBCHAPTER P. FRANCHISE LIFE INSURANCE POLICIES: ADDITIONAL
REQUIREMENTS
Sec. 1131.751. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a franchise life insurance policy issued as provided by Section 1131.065. (V.T.I.C. Art. 3.50, Sec. 1(7)(intro).)
Sec. 1131.752. PAYMENT OF PREMIUMS. (a) The premium for the policy must be paid:
(1) wholly from funds contributed by the employer or employers of the insureds;
(2) wholly from funds contributed by the labor or credit union or unions; or
(3) partly from funds described by Subdivision (1) or (2) and partly from funds contributed by the insureds.
(b) An insured's contribution toward the cost of the insurance may not exceed 40 cents per month for each $1,000 of insurance coverage. (V.T.I.C. Art. 3.50, Sec. 1(7)(c).)
Sec. 1131.753. MINIMUM ENROLLMENT. A policy of franchise life insurance must cover at least five employees or members of a labor union or credit union on the date the policy is issued. (V.T.I.C. Art. 3.50, Sec. 1(7)(b) (part).)
Sec. 1131.754. AMOUNT OF INSURANCE. (a) An insurer may not issue a policy that provides franchise term life insurance on an employee or member that, together with any other term life insurance policy issued on a franchise or group basis, exceeds $250,000, except that if the individual's annual compensation from the individual's employer or employers multiplied by seven exceeds $250,000, the franchise term life insurance may not exceed that computed amount.
(b) Subsection (a) does not apply if:
(1) the policy provides group insurance on other than the term plan;
(2) the insurance is to be used to fund benefits under a pension plan; and
(3) the amount of insurance does not exceed the amount required to provide, at the normal retirement date, the pension specified by the plan.
(c) Notwithstanding Subsection (a), a group policy that is issued by the same or another insurer to replace another group policy may provide term life insurance not to exceed the greater of:
(1) the amount provided by the policy that it replaces; or
(2) the amount provided by Subsection (a). (V.T.I.C. Art. 3.50, Secs. 1(7)(d) (part), (g).)
Sec. 1131.755. INDIVIDUAL APPLICATION REQUIRED. (a) An insurer must take an individual application for each policy of franchise life insurance.
(b) For purposes of Section 1131.754, the insurer is entitled to rely on the applicant's statements as to the applicant's other similar life insurance coverage. (V.T.I.C. Art. 3.50, Sec. 1(7)(d) (part).)
Sec. 1131.756. RIGHT TO INDIVIDUAL POLICY ON TERMINATION OF EMPLOYMENT OR MEMBERSHIP. (a) A policy of franchise life insurance must contain in substance the provisions prescribed by this section.
(b) The policy must provide that, subject to Subsections (c) and (d), if the insurance on an individual insured under the policy ceases because the individual's employment or membership in the labor or credit union terminates, the individual is entitled to have the insurer issue to the individual an individual life insurance policy without disability or other supplementary benefits.
(c) An individual policy under this section must be issued without evidence of insurability.
(d) An individual must apply for an individual policy and pay the first premium to the insurer not later than the 31st day after the date the individual's employment or membership terminates. (V.T.I.C. Art. 3.50, Sec. 1(7)(e).)
Sec. 1131.757. OPTIONAL POLICY PROVISIONS. A policy of franchise life insurance may contain in substance provisions under which:
(1) the policy is renewable at the option of the insurer only;
(2) coverage by the insurer terminates on termination of employment or membership by the insured employee or member; or
(3) an individual eligible for insurance must furnish evidence of individual insurability satisfactory to the insurer as a condition to coverage. (V.T.I.C. Art. 3.50, Sec. 1(7)(f).)
Sec. 1131.758. CERTAIN POLICIES AND PLANS UNAFFECTED. This subchapter does not affect:
(1) a policy issued before August 28, 1961;
(2) a plan of franchise life insurance in effect before August 28, 1961, if the plan was legal on the date policies were issued under the plan; or
(3) a policy issued on a salary savings franchise plan, bank deduction plan, pre-authorized check plan, or similar plan of premium collection. (V.T.I.C. Art. 3.50, Sec. 1(7)(h).)
[Sections 1131.759-1131.800 reserved for expansion]
SUBCHAPTER Q. EXTENSION OF GROUP LIFE INSURANCE
TO SPOUSES AND CHILDREN
Sec. 1131.801. APPLICABILITY OF SUBCHAPTER. This subchapter applies to any group life insurance policy issued and delivered under the laws of this state other than a policy issued and delivered to a creditor as provided by Section 1131.057 or other law providing for credit life insurance. (V.T.I.C. Art. 3.51-4A, Sec. 1 (part).)
Sec. 1131.802. EXTENSION OF GROUP LIFE INSURANCE TO SPOUSES AND CHILDREN; ELIGIBLE CHILDREN. Insurance under a group life insurance policy may be extended to cover:
(1) the spouse of each individual eligible to be insured under the policy; or
(2) a natural or adopted child of each individual eligible to be insured under the policy if the child is:
(A) younger than 21 years of age; or
(B) older than 21 years of age and:
(i) enrolled as a full-time student at an educational institution; or
(ii) physically or mentally disabled and under the parents' supervision. (V.T.I.C. Art. 3.51-4A, Sec. 1 (part).)
Sec. 1131.803. PAYMENT OF PREMIUMS. The premium for group life insurance extended to cover a spouse or child may be paid by:
(1) the group policyholder;
(2) the insured under the policy; or
(3) the group policyholder and the insured jointly. (V.T.I.C. Art. 3.51-4A, Sec. 2.)
Sec. 1131.804. AMOUNTS OF INSURANCE. (a) The amounts of insurance under the policy must be based on a plan that precludes individual selection by the insured or the policyholder.
(b) The amount of insurance on the life of the spouse or a child may not exceed the amount of insurance for which the insured is eligible under the policy. (V.T.I.C. Art. 3.51-4A, Sec. 1 (part).)
Sec. 1131.805. CONVERSION RIGHTS. On termination of group life insurance coverage for a spouse insured under this subchapter because the insured's employment terminates, the insured's eligibility for insurance terminates, or the insured dies, or because the group life insurance policy terminates, the spouse has the same conversion rights as to the group life insurance on the spouse's life as the insured. (V.T.I.C. Art. 3.51-4A, Sec. 3.)
Sec. 1131.806. CERTIFICATE OF INSURANCE. Only one certificate of insurance issued for delivery to an insured is required if the certificate includes a statement concerning any spouse's or child's coverage. (V.T.I.C. Art. 3.51-4A, Sec. 4.)
[Sections 1131.807-1131.850 reserved for expansion]
SUBCHAPTER R. CONTINUATION OF CERTAIN GROUP LIFE
INSURANCE DURING LABOR DISPUTE
Sec. 1131.851. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a group life insurance policy that is delivered or issued for delivery in this state and as to which any part of the premium is paid or is to be paid by an employer under the terms of a collective bargaining agreement. (V.T.I.C. Art. 3.51-8 (part).)
Sec. 1131.852. CONTINUATION OF GROUP LIFE INSURANCE DURING LABOR DISPUTE REQUIRED FOR CERTAIN POLICIES. An insurer may not deliver or issue for delivery a policy subject to this subchapter unless the policy provides that if the employees covered by the policy stop work because of a labor dispute, coverage continues under the policy, on timely payment of the premium, for each employee who:
(1) is covered under the policy on the date the work stoppage begins;
(2) continues to pay the employee's individual contribution, subject to the conditions provided by this subchapter; and
(3) assumes and pays during the work stoppage the contribution due from the employer, subject to the conditions provided by this subchapter. (V.T.I.C. Art. 3.51-8 (part).)
Sec. 1131.853. CONTRIBUTIONS IF POLICYHOLDER IS TRUSTEE. (a) An employee's contribution for purposes of a policy as to which the policyholder is a trustee or the trustees of a fund established or maintained wholly or partly by the employer is the amount the employee and employer would have been required to contribute to the fund for the employee if:
(1) the work stoppage had not occurred; and
(2) the agreement requiring the employer to make contributions to the fund were in effect.
(b) The policy may provide that continuation of coverage is contingent on the collection of individual contributions by the policyholder or the policyholder's agent. (V.T.I.C. Art. 3.51-8, Subdivs. (b), (c) (part).)
Sec. 1131.854. CONTRIBUTIONS IF POLICYHOLDER IS NOT TRUSTEE. (a) A policy as to which the policyholder is not a trustee or the trustees of a fund established or maintained in whole or in part by the employer must provide that the employee's individual contribution:
(1) is the policy rate applicable:
(A) on the date the work stoppage begins; and
(B) to an individual in the class to which the employee belongs as provided by the policy; or
(2) if the policy does not provide for a rate applicable to an individual, is an amount equal to the amount determined by dividing:
(A) the total monthly premium in effect under the policy on the date the work stoppage begins; by
(B) the total number of insureds under the policy on that date.
(b) The policy may provide that continuation of coverage under this subchapter is contingent on the collection of individual contributions by the union or unions representing the employees. (V.T.I.C. Art. 3.51-8, Subdivs. (a), (c) (part).)
Sec. 1131.855. PAYMENT OF CONTRIBUTION AND PREMIUM. A policy may provide that continuation of coverage for an employee under the policy is contingent on timely payment of:
(1) contributions by the employee; and
(2) the premium by the entity responsible for collecting the individual employee contributions. (V.T.I.C. Art. 3.51-8, Subdiv. (d).)
Sec. 1131.856. PAST DUE PREMIUM. (a) A policy may provide that the continuation of coverage is contingent on payment of any premium that:
(1) is unpaid on the date the work stoppage begins; and
(2) became due before the date the work stoppage begins.
(b) A premium described by Subsection (a) must be paid before the date the next premium becomes due under the policy. (V.T.I.C. Art. 3.51-8, Subdiv. (h).)
Sec. 1131.857. INDIVIDUAL PREMIUM RATE INCREASE. (a) A policy may provide that, during the period of a work stoppage, an individual premium rate may be increased by an amount not to exceed 20 percent of the amount shown in the policy, or a greater percentage as approved by the commissioner, to provide sufficient compensation to the insurer to cover increased:
(1) administrative costs; and
(2) mortality and morbidity.
(b) If a policy provides for a premium rate increase in accordance with this section, the amount of an employee's contribution must be increased by the same percentage. (V.T.I.C. Art. 3.51-8, Subdiv. (e).)
Sec. 1131.858. PREMIUM RATE CHANGE NOT LIMITED. (a) This subchapter does not limit any right of the insurer under a policy to increase or decrease a premium rate before, during, or after a work stoppage if the insurer would be entitled to increase the premium rate had a work stoppage not occurred.
(b) A change in a premium rate made under this section takes effect on a date determined by the insurer under the policy. (V.T.I.C. Art. 3.51-8, Subdiv. (f).)
Sec. 1131.859. LIMITATIONS ON CONTINUATION OF COVERAGE. This subchapter does not require the continuation of coverage under a policy for a period:
(1) longer than six months after a work stoppage occurs;
(2) beyond the time that 75 percent of the covered employees continue the coverage; or
(3) as to an individual covered employee, beyond the time that the employee takes a full-time job with another employer. (V.T.I.C. Art. 3.51-8, Subdiv. (i).)
Sec. 1131.860. OTHER PROVISIONS; COMMISSIONER APPROVAL REQUIRED. A policy may contain any other provision relating to continuation of policy coverage during a work stoppage that the commissioner approves. (V.T.I.C. Art. 3.51-8, Subdiv. (g).)
CHAPTER 1132. NOTICE OF RATE INCREASE FOR GROUP LIFE
INSURANCE
Sec. 1132.001. NOTICE OF RATE INCREASE
CHAPTER 1132. NOTICE OF RATE INCREASE FOR GROUP LIFE
INSURANCE
Sec. 1132.001. NOTICE OF RATE INCREASE. (a) In this section, "insurer" means:
(1) a life insurance company;
(2) a mutual life insurance company;
(3) a natural premium life insurance company;
(4) a fraternal benefit society; or
(5) a local mutual aid association.
(b) Not later than the 31st day before the date on which a premium rate increase takes effect on a group policy of life insurance delivered or issued for delivery in this state by an insurer, the insurer shall give written notice to the policyholder of:
(1) the amount of the increase; and
(2) the date on which the increase is to take effect.
(c) An insurer that issues a group policy described by Subsection (b) to a multiple employer trust shall give the notice required by that subsection to the trustee or group policyholder.
(d) The notice required by this section must be based on coverage in effect on the date of the notice.
(e) This section may not be construed to prevent an insurer, at the request of a policyholder, from negotiating a change in benefits or rates after delivery of the notice required by this section. (V.T.I.C. Art. 3.51-10.)
[Chapters 1133-1150 reserved for expansion]
SUBTITLE C. SPECIALIZED COVERAGES
CHAPTER 1151. INDUSTRIAL LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1151.001. DEFINITION
Sec. 1151.002. GENERAL APPLICABILITY OF CHAPTER
Sec. 1151.003. APPLICABILITY OF CHAPTER TO POLICY PROVIDING
ACCIDENT AND HEALTH BENEFITS
Sec. 1151.004. CERTAIN ASSOCIATIONS EXCEPTED
Sec. 1151.005. CERTAIN NONPROFIT ORGANIZATIONS EXCEPTED
[Sections 1151.006-1151.050 reserved for expansion]
SUBCHAPTER B. REQUIRED POLICY PROVISIONS
Sec. 1151.051. POLICY TITLE
Sec. 1151.052. ENTIRE CONTRACT
Sec. 1151.053. AGENT UNAUTHORIZED TO WAIVE OR CHANGE TERMS
Sec. 1151.054. STATEMENT MADE BY OR ON BEHALF OF INSURED
Sec. 1151.055. INCONTESTABILITY OF POLICY
Sec. 1151.056. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF INSURED IS
MISSTATED
Sec. 1151.057. GRACE PERIOD
Sec. 1151.058. NONFORFEITURE BENEFITS AND CASH SURRENDER
VALUES IN GENERAL
Sec. 1151.059. SURPLUS
Sec. 1151.060. CLAIM BASED ON DEATH OF INSURED
Sec. 1151.061. REINSTATEMENT OF POLICY
Sec. 1151.062. EXCEPTION FOR POLICIES ISSUED OR GRANTED UNDER
CERTAIN NONFORFEITURE PROVISIONS
[Sections 1151.063-1151.100 reserved for expansion]
SUBCHAPTER C. AUTHORIZED OR PROHIBITED POLICY PROVISIONS
Sec. 1151.101. AUTHORIZED PROVISIONS
Sec. 1151.102. PROHIBITED PROVISIONS
[Sections 1151.103-1151.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER POLICIES
Sec. 1151.151. EXTENDED TERM OR PAID-UP INSURANCE FOR CERTAIN
POLICIES
Sec. 1151.152. PROVISIONS CONCERNING STIPULATED FORM OF
INSURANCE OR SPECIFIED CASH SURRENDER VALUE
IN CERTAIN POLICIES
Sec. 1151.153. COMPUTATION OF NET VALUE OF STIPULATED FORM OF
INSURANCE OR SPECIFIED CASH SURRENDER
VALUE
Sec. 1151.154. SURRENDER OF POLICY FOR SPECIFIED CASH
SURRENDER VALUE
CHAPTER 1151. INDUSTRIAL LIFE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1151.001. DEFINITION. In this chapter, "industrial life insurance" means life insurance under which the premiums are payable:
(1) weekly; or
(2) less often than weekly but at least monthly, if the face amount of insurance coverage provided by the policy is $1,000 or less. (V.T.I.C. Art. 3.52, Sec. 1 (part).)
Sec. 1151.002. GENERAL APPLICABILITY OF CHAPTER. (a) Except as provided by other law, this chapter controls the form and content of an industrial life insurance policy delivered or issued for delivery in this state by an insurance company.
(b) This chapter does not control an industrial life insurance policy delivered or issued for delivery in this state by an association described by Section 1151.004. (V.T.I.C. Art. 3.52, Sec. 7 (part).)
Sec. 1151.003. APPLICABILITY OF CHAPTER TO POLICY PROVIDING ACCIDENT AND HEALTH BENEFITS. Except as otherwise provided by this chapter, if an industrial life insurance policy provides accident and health benefits in addition to natural death benefits, this chapter applies only to the life insurance benefits provided by that policy. (V.T.I.C. Art. 3.52, Sec. 1 (part).)
Sec. 1151.004. CERTAIN ASSOCIATIONS EXCEPTED. This chapter does not apply to any of the following associations operating under Chapter 886:
(1) a local mutual aid association;
(2) a statewide mutual life, health, and accident association; or
(3) a burial association. (V.T.I.C. Art. 3.52, Sec. 7 (part).)
Sec. 1151.005. CERTAIN NONPROFIT ORGANIZATIONS EXCEPTED. This chapter does not apply to:
(1) an order, society, association, or labor organization that:
(A) admits to membership only persons engaged in one or more crafts or hazardous occupations in the same or similar lines of business; and
(B) does not operate for profit;
(2) a ladies auxiliary to an order, society, association, or labor organization described by Subdivision (1); or
(3) a fraternal order, association, or society. (V.T.I.C. Art. 3.52, Sec. 8.)
[Sections 1151.006-1151.050 reserved for expansion]
SUBCHAPTER B. REQUIRED POLICY PROVISIONS
Sec. 1151.051. POLICY TITLE. An industrial life insurance policy must contain a title on the face of the policy that:
(1) briefly describes the form of the policy; and
(2) includes the printed words "Industrial Policy." (V.T.I.C. Art. 3.52, Secs. 1 (part), 2 (part).)
Sec. 1151.052. ENTIRE CONTRACT. (a) An industrial life insurance policy must provide that the policy is the entire contract between the parties, except that at the option of the insurer, the insurer may make the policy and the policy application the entire contract between the parties.
(b) To make the policy application a part of the contract, a copy of the application must be endorsed on or attached to the policy at the time the policy is issued. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.053. AGENT UNAUTHORIZED TO WAIVE OR CHANGE TERMS. An industrial life insurance policy must provide that an agent may not waive or change the terms of an application or policy. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.054. STATEMENT MADE BY OR ON BEHALF OF INSURED. An industrial life insurance policy must provide that, in the absence of fraud, a statement made by the insured or on behalf of the insured is considered a representation and not a warranty. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.055. INCONTESTABILITY OF POLICY. An industrial life insurance policy must provide that, after the policy has been in effect during the lifetime of the insured for the two-year period following the date of the policy, the policy is incontestable except:
(1) for nonpayment of a premium;
(2) for violation of any policy condition relating to exclusion from coverage for naval or military service in time of war; and
(3) concerning a provision relating to:
(A) benefits in case of total or permanent disability as defined by the policy; or
(B) additional insurance:
(i) specifically against accidental death; or
(ii) against loss of, or loss of use of, specific parts of the body. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.056. ADJUSTMENT OF AMOUNT PAYABLE IF AGE OF INSURED IS MISSTATED. An industrial life insurance policy must provide that, if the age of the insured is misstated, the amount payable under the policy is the amount of insurance that the premium paid would have purchased if the insured's age had been stated correctly. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.057. GRACE PERIOD. (a) An industrial life insurance policy must provide that the insured is entitled to a grace period stated in the policy within which any premium after the first premium may be paid. The grace period must be at least a four-week period.
(b) During the grace period the policy continues in effect, but if an event under which the insurer may be liable under the policy occurs during the grace period and before the overdue premiums are paid, the amount of the overdue premiums may be deducted in a settlement made under the policy. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.058. NONFORFEITURE BENEFITS AND CASH SURRENDER VALUES IN GENERAL. An industrial life insurance policy must provide, in case of default in payment of premiums, nonforfeiture benefits and cash surrender values in accordance with:
(1) Sections 1151.152-1151.154; or
(2) Chapter 1105, for a policy issued on or after the date determined under Section 1105.002(a) or (b), as applicable. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.059. SURPLUS. An industrial life insurance policy that is a participating policy must provide that the insurer shall annually determine and apportion any divisible surplus accruing on the policy. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.060. CLAIM BASED ON DEATH OF INSURED. An industrial life insurance policy must provide that if a claim arises as the result of the death of the insured, the insurer shall settle the claim not later than two months after the date the insurer receives at the insurer's home office:
(1) proof of death satisfactory to the insurer; and
(2) proof of the right of the claimant to the insurance proceeds. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.061. REINSTATEMENT OF POLICY. (a) An industrial life insurance policy must provide that unless the cash surrender value has been paid or the term of extended insurance has expired, the policy may be reinstated not later than the first anniversary of or, at the option of the insurer, not later than the 52nd week after the date of default in payment of premiums if the insured:
(1) pays all overdue premiums;
(2) pays or reinstates any other debt owed to the insurer on the policy; and
(3) presents evidence of insurability satisfactory to the insurer.
(b) The insurer may impose on the overdue premiums interest at an annual rate specified in the policy, not to exceed six percent. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.062. EXCEPTION FOR POLICIES ISSUED OR GRANTED UNDER CERTAIN NONFORFEITURE PROVISIONS. This subchapter does not apply to a policy issued or granted under a nonforfeiture provision prescribed by Section 1151.058. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
[Sections 1151.063-1151.100 reserved for expansion]
SUBCHAPTER C. AUTHORIZED OR PROHIBITED POLICY PROVISIONS
Sec. 1151.101. AUTHORIZED PROVISIONS. In addition to the provisions required by Subchapter B and Section 1151.152, an industrial life insurance policy may:
(1) exclude liability or promise a benefit that is less than the full amount payable as a death benefit if the insured:
(A) dies by the insured's own hand, regardless of whether the insured is sane or insane; or
(B) dies as a result of engaging in:
(i) a specified hazardous occupation; or
(ii) an aviation activity under a condition specified in the policy approved by the department as provided by Article 3.42;
(2) limit the maximum amount payable on the death of a child younger than 15 years of age; and
(3) include any other provision not otherwise prohibited by this chapter. (V.T.I.C. Art. 3.52, Secs. 4, 5 (part).)
Sec. 1151.102. PROHIBITED PROVISIONS. (a) An industrial life insurance policy may not:
(1) require a cause of action based on the policy to be initiated before the second anniversary of the date the cause of action accrues; or
(2) except as otherwise provided by this subchapter, establish a method of settlement at maturity that provides less value than the face amount of insurance coverage provided by the policy and any dividend additions to the policy, less:
(A) any debt owed to the insurer on the policy; and
(B) any premium that may be deducted under the terms of the policy.
(b) Subsection (a)(2) does not prevent a limitation from being imposed on payment of an additional accidental death benefit in case of accidental death resulting from certain specified causes.
(c) A nonparticipating or term policy may not incorporate any part of a provision described by Subchapter B or Section 1151.152 that does not apply to that type of policy. (V.T.I.C. Art. 3.52, Secs. 2 (part), 5 (part).)
[Sections 1151.103-1151.150 reserved for expansion]
SUBCHAPTER D. RIGHTS OF INSURED UNDER CERTAIN OLDER POLICIES
Sec. 1151.151. EXTENDED TERM OR PAID-UP INSURANCE FOR CERTAIN POLICIES. (a) This section applies only to a policy delivered or issued for delivery in this state before March 29, 1941, under former Article 3.43 of this code.
(b) An insured or a beneficiary of the insured is entitled to elect extended term or paid-up insurance under an industrial life insurance policy that does not by its terms provide a stipulated form of insurance to the insured or beneficiary on default in payment of premiums if:
(1) premiums have been paid on the policy for at least three years; and
(2) the insured or beneficiary gives written notice of the election to the insurer at the insurer's home office before the expiration of the term of extended insurance.
(c) An insured or beneficiary who does not make an election as provided by Subsection (b) is considered to have elected extended term insurance.
(d) The net value of extended term or paid-up insurance shall be determined as provided by Section 1151.153. (V.T.I.C. Art. 3.52, Sec. 3.)
Sec. 1151.152. PROVISIONS CONCERNING STIPULATED FORM OF INSURANCE OR SPECIFIED CASH SURRENDER VALUE IN CERTAIN POLICIES. (a) An industrial life insurance policy issued before the date described by Section 1151.058(2) must contain a provision substantially as follows:
(1) in case of default in payment of premiums:
(A) after premiums have been paid for three years, a stipulated form of insurance is available, effective from the due date of the defaulted premium; and
(B) after premiums have been paid for five years, the stipulated form of insurance described by Paragraph (A) or a specified cash surrender value is available, at the election of the insured; and
(2) the stipulated form of insurance takes effect unless the insured applies in writing for the specified cash surrender value within the grace period following the due date of the defaulted premium.
(b) The policy must:
(1) state the amount and term of the stipulated form of insurance, computed assuming that there is no debt owed on or dividend additions to the policy;
(2) specify the mortality table, the rate of interest, and the method of valuation, if a method of valuation other than net level premium is used, adopted for computing the reserve on the policy; and
(3) provide a table showing in numbers the nonforfeiture options available under the policy at the end of each year in case of default in payment of premiums.
(c) Subsections (a), (b)(1), and (b)(3) do not apply to a term insurance policy with a term of 20 years or less.
(d) The table described by Subsection (b)(3) must begin with the year in which the numbers on the nonforfeiture options become available and must cover not more than the first 20 years of the policy. On the expiration of the period for which the numbers are shown by the policy, the insurer shall provide an extension of the table on request. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.153. COMPUTATION OF NET VALUE OF STIPULATED FORM OF INSURANCE OR SPECIFIED CASH SURRENDER VALUE. (a) The net value of the stipulated form of insurance or the specified cash surrender value available under Section 1151.152 may not be less than the reserve on the policy at the end of the last completed quarter of the policy year for which premiums have been paid, less:
(1) an amount of not more than:
(A) 2-1/2 percent of the maximum amount insured under the policy and any dividend additions to the policy, if the age of the insured on the date the policy was issued is younger than 10 years; or
(B) 2-1/2 percent of the amount insured under the policy at the time the computation is made and any dividend additions to the policy, if the age of the insured on the date the policy was issued is 10 years or older; and
(2) any existing debt to the insurer on or secured under the policy.
(b) The reserve described by Subsection (a):
(1) includes:
(A) the reserve for any paid-up additions to the policy; and
(B) the amount of any dividends credited to the policy; and
(2) excludes any reserve on:
(A) total or permanent disability, as defined by the policy; and
(B) additional accidental death benefits.
(c) In computing the value of paid-up term insurance with any accompanying pure endowment, a rate of mortality may be assumed that is not more than:
(1) 130 percent of the rate of mortality according to the applicable table, if the 1941 Standard Industrial Mortality Table or the 1941 Sub-standard Industrial Mortality Table is adopted for computing the reserve; or
(2) the rate of mortality shown by:
(A) the Commissioners 1961 Industrial Extended Term Insurance Table, if the Commissioners 1961 Standard Industrial Mortality Table is adopted for computing the reserve; or
(B) any other mortality table specified by the insurer and approved by the department, if the policy is substandard. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
Sec. 1151.154. SURRENDER OF POLICY FOR SPECIFIED CASH SURRENDER VALUE. (a) An industrial life insurance policy issued before the date described by Section 1151.058(2) under which the insured applies for cash surrender value must be surrendered for the specified cash surrender value to the insurer at the insurer's home office within the grace period following the due date of the defaulted premium.
(b) The insurer may defer payment for a period of not more than six months after the date of application for the specified cash surrender value. (V.T.I.C. Art. 3.52, Sec. 2 (part).)
CHAPTER 1152. SEPARATE ACCOUNTS, VARIABLE CONTRACTS, AND
RELATED PRODUCTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1152.001. APPLICABILITY OF CODE
Sec. 1152.002. RULES
[Sections 1152.003-1152.050 reserved for expansion]
SUBCHAPTER B. SEPARATE ACCOUNTS
Sec. 1152.051. ESTABLISHMENT OF SEPARATE ACCOUNTS
Sec. 1152.052. OWNERSHIP OF AMOUNTS IN SEPARATE ACCOUNT
Sec. 1152.053. TRANSFER OF ASSETS BETWEEN SEPARATE ACCOUNTS
Sec. 1152.054. COMPLIANCE WITH FEDERAL OR STATE LAW FOR
SEPARATE ACCOUNT
Sec. 1152.055. GUARANTEED BENEFITS AND MONEY RESTRICTION
FOR SEPARATE ACCOUNTS
Sec. 1152.056. INVESTMENT LIMITS NOT APPLICABLE TO SEPARATE
ACCOUNT
Sec. 1152.057. ALLOCATION OF GAINS OR LOSSES ON
SEPARATE ACCOUNT
Sec. 1152.058. ASSET VALUATION IN SEPARATE ACCOUNT
Sec. 1152.059. SEPARATE ACCOUNT NOT CHARGEABLE WITH OTHER
LIABILITIES
[Sections 1152.060-1152.100 reserved for expansion]
SUBCHAPTER C. VARIABLE CONTRACTS
Sec. 1152.101. SOLE AUTHORITY TO REGULATE VARIABLE
CONTRACTS
Sec. 1152.102. AUTHORIZATION REQUIRED FOR VARIABLE
CONTRACTS
Sec. 1152.103. CONSIDERATION OF COMPANY'S CONDITION OR METHOD OF
OPERATION
Sec. 1152.104. AUTHORIZATION FOR SUBSIDIARY OR AFFILIATE OF
AUTHORIZED LIFE INSURANCE COMPANY
Sec. 1152.105. WAIVER OF HEARING REQUIREMENT
Sec. 1152.106. RESERVE LIABILITY FOR VARIABLE CONTRACT
Sec. 1152.107. SEPARATE ANNUAL STATEMENT REQUIRED
Sec. 1152.108. GRACE, REINSTATEMENT, AND NONFORFEITURE
PROVISIONS REQUIRED
Sec. 1152.109. VARIABLE BENEFITS PROVISIONS
[Sections 1152.110-1152.150 reserved for expansion]
SUBCHAPTER D. VARIABLE CONTRACT AGENT'S LICENSE
Sec. 1152.151. VARIABLE CONTRACT AGENT'S LICENSE REQUIRED;
CRITERIA FOR ISSUANCE
Sec. 1152.152. LICENSE AND EXAMINATION FEES
Sec. 1152.153. EXPIRATION
Sec. 1152.154. RENEWAL; FEE
Sec. 1152.155. REVOCATION
Sec. 1152.156. SUSPENSION
Sec. 1152.157. APPLICATION FOR LICENSE AFTER DENIAL OR
REVOCATION
Sec. 1152.158. MULTIPLE REPRESENTATION; APPLICATION; FEES
Sec. 1152.159. DUPLICATE LICENSE
Sec. 1152.160. USE OF FEES
[Sections 1152.161-1152.200 reserved for expansion]
SUBCHAPTER E. MODIFIED GUARANTEED CONTRACTS
Sec. 1152.201. DEFINITION
Sec. 1152.202. APPLICABILITY OF LAWS GOVERNING LIFE
INSURANCE COMPANIES
Sec. 1152.203. RULES
Sec. 1152.204. NONFORFEITURE VALUES
Sec. 1152.205. SEPARATE ACCOUNT STATEMENT
CHAPTER 1152. SEPARATE ACCOUNTS, VARIABLE CONTRACTS, AND
RELATED PRODUCTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1152.001. APPLICABILITY OF CODE. (a) Except as provided by Subsection (b), this code applies to separate accounts described by this chapter and contracts relating to those accounts.
(b) The following sections do not apply to the separate accounts and contracts:
(1) Sections 882.303 and 882.703;
(2) Subchapters H and J, Chapter 882;
(3) Sections 1101.002(b), 1101.005, 1101.009, 1101.012, 1101.052, 1101.055, and 1101.152-1101.156;
(4) Chapter 1105; and
(5) Section 1131.103.
(c) A separate account established under former Article 3.39 Part III, 3.72, or 3.73 is considered to be established under this chapter. A policy or other agreement issued before September 1, 1984, under one of those articles remains subject to the article, as the article existed immediately before September 1, 1984. (V.T.I.C. Art. 3.75, Sec. 9.)
Sec. 1152.002. RULES. The commissioner may adopt rules that are fair, reasonable, and appropriate to augment and implement this chapter, including rules establishing requirements for:
(1) agent licensing;
(2) standard policy provisions; and
(3) disclosure. (V.T.I.C. Art. 3.75, Sec. 8 (part).)
[Sections 1152.003-1152.050 reserved for expansion]
SUBCHAPTER B. SEPARATE ACCOUNTS
Sec. 1152.051. ESTABLISHMENT OF SEPARATE ACCOUNTS. A domestic life insurance company may establish separate accounts under this subchapter and may allocate to each account amounts, including proceeds applied under optional modes of settlement or under dividend options, to:
(1) provide for life insurance, an annuity, or a benefit incidental to the insurance or annuity, payable in a fixed amount, a variable amount, or both a fixed amount and a variable amount; or
(2) fund a benefit for a pension, retirement, or profit sharing plan payable in a fixed amount, a variable amount, or both a fixed amount and a variable amount. (V.T.I.C. Art. 3.75, Sec. 1(a).)
Sec. 1152.052. OWNERSHIP OF AMOUNTS IN SEPARATE ACCOUNT. (a) An insurance company owns an amount allocated to a separate account under this subchapter.
(b) The company is not and may not represent itself as a trustee regarding an amount allocated to a separate account under this subchapter. (V.T.I.C. Art. 3.75, Sec. 1(f) (part).)
Sec. 1152.053. TRANSFER OF ASSETS BETWEEN SEPARATE ACCOUNTS. (a) Except as provided by Subsection (b), an insurance company may not sell, exchange, or otherwise transfer an asset between the company's separate accounts or between any other investment account and a separate account unless:
(1) in case of a transfer into a separate account, the transfer is made solely to establish the account or to support the operation of a contract regarding the separate account to which the transfer was made; and
(2) the transfer, whether into or from a separate account, is made:
(A) by a transfer of cash; or
(B) by a transfer of securities if the securities have a readily determinable market value and the commissioner approves the transfer.
(b) The commissioner may approve a transfer between accounts other than a transfer described by Subsection (a) if, in the commissioner's opinion, the transfer would not be inequitable. (V.T.I.C. Art. 3.75, Secs. 1(g), (h).)
Sec. 1152.054. COMPLIANCE WITH FEDERAL OR STATE LAW FOR SEPARATE ACCOUNT. (a) To comply with a federal or state law, an insurance company, regarding a separate account, including a separate account that is a management investment company or a unit investment trust, may, to the extent the company considers it necessary, provide:
(1) for appropriate voting and other rights for persons who have an interest in the account; and
(2) special rights and procedures to conduct the business of the account, including rights and procedures related to:
(A) investment policy;
(B) investment advisory services;
(C) selection of independent public accountants; and
(D) selection of a committee to manage the business of the account.
(b) The members of a committee selected under Subsection (a)(2)(D) are not required to be affiliated with the company. (V.T.I.C. Art. 3.75, Sec. 1(i).)
Sec. 1152.055. GUARANTEED BENEFITS AND MONEY RESTRICTION FOR SEPARATE ACCOUNTS. An insurance company may not maintain a reserve for a benefit guaranteed as to dollar amount and duration or funds guaranteed as to principal amount or stated rate of interest in a separate account except with the commissioner's approval and under conditions for investments, and other matters, that recognize the guaranteed nature of the benefits provided and that are prescribed by the department. (V.T.I.C. Art. 3.75, Sec. 1(d).)
Sec. 1152.056. INVESTMENT LIMITS NOT APPLICABLE TO SEPARATE ACCOUNT. Except as provided by Section 1152.055:
(1) an amount allocated to a separate account, including an accumulation on that amount, may be invested without regard to a law of this state governing a life insurance company investment; and
(2) an investment in a separate account may not be considered in applying an investment limit otherwise applicable to the insurance company. (V.T.I.C. Art. 3.75, Sec. 1(c).)
Sec. 1152.057. ALLOCATION OF GAINS OR LOSSES ON SEPARATE ACCOUNT. An insurance company shall credit to or charge against a separate account the gain or loss, realized or unrealized, from an asset allocated to the account without regard to other gains or losses of the insurance company. (V.T.I.C. Art. 3.75, Sec. 1(b).)
Sec. 1152.058. ASSET VALUATION IN SEPARATE ACCOUNT. An asset allocated to a separate account is valued:
(1) at its market value on the date of valuation;
(2) as provided under a contract, rule, or other written agreement applicable to the separate account, if a readily available market does not exist;
(3) as provided by the rules otherwise applicable to the insurance company's assets for any portion of the assets that is equal to the company's reserve liability with regard to the guaranteed benefits and funds under Section 1152.055; or
(4) under any other method approved by the commissioner. (V.T.I.C. Art. 3.75, Sec. 1(e).)
Sec. 1152.059. SEPARATE ACCOUNT NOT CHARGEABLE WITH OTHER LIABILITIES. To the extent provided under the applicable contracts, the portion of a separate account's assets equal to the reserves and other contract liabilities regarding that account is not chargeable with a liability arising out of any other business of the insurance company. (V.T.I.C. Art. 3.75, Sec. 1(f) (part).)
[Sections 1152.060-1152.100 reserved for expansion]
SUBCHAPTER C. VARIABLE CONTRACTS
Sec. 1152.101. SOLE AUTHORITY TO REGULATE VARIABLE CONTRACTS. The commissioner has sole authority to regulate the issuance and sale of a variable contract under:
(1) this chapter; and
(2) rules adopted under Section 1152.002. (V.T.I.C. Art. 3.75, Sec. 8 (part).)
Sec. 1152.102. AUTHORIZATION REQUIRED FOR VARIABLE CONTRACTS. (a) An insurance company may not deliver or issue for delivery a variable contract in this state unless authorized by the commissioner under this section.
(b) If the commissioner finds, after notice and hearing, that the company is qualified to issue, deliver, and use a variable contract under this chapter and rules adopted under Section 1152.002, the commissioner shall issue an order relating to the company's authority to issue, deliver, and use a variable contract in this state. (V.T.I.C. Art. 3.75, Sec. 3 (part).)
Sec. 1152.103. CONSIDERATION OF COMPANY'S CONDITION OR METHOD OF OPERATION. (a) For purposes of this section, the domicile of an alien company is its state of entry.
(b) In considering a company's condition or method of operation, the factors the commissioner shall consider must include:
(1) the company's history and financial condition;
(2) the character, responsibility, and fitness of the company's officers and directors;
(3) the law, including rules, under which the company is authorized to do business in the state of domicile to issue a variable contract; and
(4) whether the condition or method of operation in connection with the issuance of a variable contract will make the company's operation hazardous to the public or the company's policyholders in this state. (V.T.I.C. Art. 3.75, Secs. 3(b), (c).)
Sec. 1152.104. AUTHORIZATION FOR SUBSIDIARY OR AFFILIATE OF AUTHORIZED LIFE INSURANCE COMPANY. The commissioner may determine, after notice and hearing, that a company that is a subsidiary of or affiliated with an authorized life insurance company through common management or ownership meets the requirements of this subchapter if either the company or the parent or affiliated company meets the requirements of this subchapter. (V.T.I.C. Art. 3.75, Sec. 3(d).)
Sec. 1152.105. WAIVER OF HEARING REQUIREMENT. (a) If a company, its parent, or a commonly controlled affiliate is an authorized life insurance company, the company may apply to the commissioner for a waiver of the hearing requirements under Section 1152.102 or 1152.104.
(b) The commissioner may waive the hearing requirement if the commissioner determines that a hearing is not necessary to find the company qualified under this subchapter. (V.T.I.C. Art. 3.75, Sec. 3(e).)
Sec. 1152.106. RESERVE LIABILITY FOR VARIABLE CONTRACT. The reserve liability for a variable contract must be established under actuarial procedures that recognize:
(1) the variable nature of the benefits provided; and
(2) any mortality guarantees. (V.T.I.C. Art. 3.75, Sec. 4.)
Sec. 1152.107. SEPARATE ANNUAL STATEMENT REQUIRED. (a) An insurance company authorized under this subchapter to issue, deliver, or use a variable annuity contract or variable life contract shall file with the department a separate annual statement of its separate variable contract accounts.
(b) The company shall file the statement:
(1) on a form prescribed or approved by the department; and
(2) simultaneously with the annual statement required by Sections 841.255 and 882.003.
(c) The statement must:
(1) include details as to all income, disbursements, assets, and liability items associated with the separate variable contract accounts; and
(2) be under oath of two company officers. (V.T.I.C. Art. 3.75, Sec. 6.)
Sec. 1152.108. GRACE, REINSTATEMENT, AND NONFORFEITURE PROVISIONS REQUIRED. (a) An individual variable life insurance or individual variable annuity contract delivered or issued for delivery in this state must contain grace, reinstatement, and nonforfeiture provisions appropriate to the contract.
(b) A group variable contract delivered or issued for delivery in this state must contain a grace period provision appropriate to the contract. (V.T.I.C. Art. 3.75, Sec. 5.)
Sec. 1152.109. VARIABLE BENEFITS PROVISIONS. (a) A contract providing benefits payable in variable amounts that is delivered or issued for delivery in this state must state the essential features of the procedures the insurance company will follow in determining the dollar amount of the variable benefits.
(b) A contract under which the benefits vary to reflect investment experience, including a group contract or a certificate in evidence of variable benefits issued under a group contract, must state:
(1) on its first page, that the benefits under the contract are on a variable basis; and
(2) that the dollar amount will vary. (V.T.I.C. Art. 3.75, Sec. 2.)
[Sections 1152.110-1152.150 reserved for expansion]
SUBCHAPTER D. VARIABLE CONTRACT AGENT'S LICENSE
Sec. 1152.151. VARIABLE CONTRACT AGENT'S LICENSE REQUIRED; CRITERIA FOR ISSUANCE. (a) A person may not sell or offer for sale in this state a variable contract, or act to negotiate, make, or consummate a variable contract for another, unless the department has licensed the person as a variable contract agent.
(b) The department may not issue the license unless the department is satisfied, after examination, that the person is qualified to act as an agent because of the person's training, knowledge, ability, and character. (V.T.I.C. Art. 3.75, Sec. 7(a) (part).)
Sec. 1152.152. LICENSE AND EXAMINATION FEES. (a) Before issuing a license under Section 1152.151, the commissioner must receive from an applicant:
(1) a nonrefundable license fee in an amount not to exceed $50; and
(2) unless the department accepts under Article 21.01-1 a qualifying examination administered by a testing service, an examination fee in an amount not to exceed $20.
(b) The commissioner shall set the amount of the fees.
(c) A new examination fee must be paid for each examination.
(d) An examination fee may not be refunded unless the applicant:
(1) not later than 24 hours before the time the examination begins, notifies the commissioner that an emergency situation exists;
(2) receives the commissioner's permission to not take the examination; and
(3) does not appear to take the examination. (V.T.I.C. Art. 3.75, Sec. 7(b) (part).)
Sec. 1152.153. EXPIRATION. A license issued to a variable contract agent expires on the second anniversary of the date the license is issued. (V.T.I.C. Art. 3.75, Sec. 7(c).)
Sec. 1152.154. RENEWAL; FEE. (a) A person may renew a license issued under this subchapter in the manner provided by Article 21.01-2.
(b) The commissioner shall set the renewal fee in an amount not to exceed $50.
(c) A person may not renew a license that has been suspended or revoked. (V.T.I.C. Art. 3.75, Sec. 7(f) (part).)
Sec. 1152.155. REVOCATION. After notice and a hearing, the commissioner may revoke a variable contract agent's license if the commissioner finds that the license holder does not have the qualifications required for the issuance of the license. (V.T.I.C. Art. 3.75, Sec. 7(a) (part).)
Sec. 1152.156. SUSPENSION. The commissioner shall suspend a variable contract agent's license if the agent is not operating under an appointment from an insurance company. The commissioner shall terminate the suspension when the department receives acceptable notice that an appointment exists. (V.T.I.C. Art. 3.75, Sec. 7(d).)
Sec. 1152.157. APPLICATION FOR LICENSE AFTER DENIAL OR REVOCATION. (a) A license applicant or holder whose application or license has been denied or revoked under this subchapter may not apply for a license as an insurance agent before the first anniversary of:
(1) the effective date of the denial or revocation; or
(2) the date of the final court order affirming that action, if the applicant or license holder seeks judicial review of the denial or revocation.
(b) The commissioner may deny a timely filed application if the applicant does not show good cause why the denial or revocation of the previous license application or license should not bar the issuance of a new license. (V.T.I.C. Art. 3.75, Sec. 7(e).)
Sec. 1152.158. MULTIPLE REPRESENTATION; APPLICATION; FEES. (a) A variable contract agent may apply to act as an agent for more than one insurance company.
(b) The agent and the insurance company must give notice to the department of any additional appointment authorizing the agent to act as an agent for that company. The notice must be accompanied by:
(1) a certificate from the company that the company desires to appoint the applicant as its agent;
(2) a nonrefundable fee; and
(3) any other information that the department requires.
(c) The commissioner shall set the fee in an amount not to exceed $16.
(d) The agent may act for the company if:
(1) the department approves the application for an additional appointment; or
(2) notice of disapproval is not received before the eighth day after the date on which the department received the completed application and fee. (V.T.I.C. Art. 3.75, Sec. 7(g) (part).)
Sec. 1152.159. DUPLICATE LICENSE. (a) A variable contract agent may request a duplicate for a license issued under this subchapter.
(b) The commissioner must collect a duplicate license fee from the agent before providing the duplicate to the agent. The commissioner shall set the fee in an amount not to exceed $20. (V.T.I.C. Art. 3.75, Sec. 7(h).)
Sec. 1152.160. USE OF FEES. The department shall deposit a fee collected under this subchapter to the credit of the Texas Department of Insurance operating account, to be used to administer this subchapter and Article 21.07-1. (V.T.I.C. Art. 3.75, Secs. 7(b) (part), (g) (part).)
[Sections 1152.161-1152.200 reserved for expansion]
SUBCHAPTER E. MODIFIED GUARANTEED CONTRACTS
Sec. 1152.201. DEFINITION. In this subchapter, "modified guaranteed contract" means an individual life insurance policy or deferred annuity contract as to which:
(1) the underlying assets are held in a separate account; and
(2) the value is guaranteed if the policy or contract is held for a specified period. (V.T.I.C. Art. 3.75, Sec. 10(a) (part).)
Sec. 1152.202. APPLICABILITY OF LAWS GOVERNING LIFE INSURANCE COMPANIES. Unless otherwise approved by the commissioner, the laws of this state governing the investments of life insurance companies apply to an asset held in a separate account that relates to a modified guaranteed contract that provides for nonforfeiture values that may vary based on a market-value adjustment formula. (V.T.I.C. Art. 3.75, Sec. 10(b) (part).)
Sec. 1152.203. RULES. In addition to any rules adopted under Section 1152.002, the commissioner may adopt reasonable rules that apply only to a modified guaranteed contract, to appropriately regulate:
(1) a modified guaranteed contract under this chapter; and
(2) the separate account maintained in relation to a modified guaranteed contract. (V.T.I.C. Art. 3.75, Sec. 10(c).)
Sec. 1152.204. NONFORFEITURE VALUES. (a) A modified guaranteed contract must contain nonforfeiture values that are based on a market-value adjustment formula if the contract is held for a period shorter than the period specified in the contract. The formula may or may not reflect the value of assets held in the separate account.
(b) A modified guaranteed contract must prominently state on its first page that the nonforfeiture values may increase or decrease based on the market-value formula specified in the contract. (V.T.I.C. Art. 3.75, Secs. 10(a) (part), (b) (part).)
Sec. 1152.205. SEPARATE ACCOUNT STATEMENT. An insurance company that files a separate account statement under Section 1152.107 shall include in that statement a statement for each separate account that relates to a modified guaranteed contract. (V.T.I.C. Art. 3.75, Sec. 10(b) (part).)
CHAPTER 1153. CREDIT LIFE INSURANCE AND CREDIT
ACCIDENT AND HEALTH INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1153.001. SHORT TITLE
Sec. 1153.002. DEFINITIONS
Sec. 1153.003. APPLICABILITY OF CHAPTER
Sec. 1153.004. RULES
Sec. 1153.005. CONSTRUCTION
Sec. 1153.006. LEGISLATIVE INTENT
Sec. 1153.007. FILING FEE
Sec. 1153.008. GAIN OR ADVANTAGE FROM INSURANCE NOT
PROHIBITED CHARGE
[Sections 1153.009-1153.050 reserved for expansion]
SUBCHAPTER B. FORMS
Sec. 1153.051. FILING OF FORM
Sec. 1153.052. REQUIREMENTS RELATING TO INSURANCE
POLICY OR CERTIFICATE
Sec. 1153.053. DISAPPROVAL OF FORM
Sec. 1153.054. WITHDRAWAL OF APPROVAL OF FORM
Sec. 1153.055. PROHIBITIONS RELATING TO ISSUANCE OR
USE OF FORM
[Sections 1153.056-1153.100 reserved for expansion]
SUBCHAPTER C. RATES
Sec. 1153.101. FILING OF SCHEDULE OF RATES
Sec. 1153.102. REVISION OF SCHEDULE OF RATES
Sec. 1153.103. PRESUMPTIVE PREMIUM RATE
Sec. 1153.104. APPEAL OF PRESUMPTIVE RATE
[Sections 1153.105-1153.150 reserved for expansion]
SUBCHAPTER D. CREDIT INSURANCE REQUIREMENTS
Sec. 1153.151. FORMS OF CREDIT LIFE INSURANCE
Sec. 1153.152. FORMS OF CREDIT ACCIDENT AND HEALTH
INSURANCE
Sec. 1153.153. EVIDENCE OF INSURANCE
Sec. 1153.154. REQUIREMENTS FOR DELIVERY OR ISSUANCE OF
CREDIT INSURANCE POLICY
Sec. 1153.155. LIMITS ON AMOUNT OF CREDIT LIFE INSURANCE
Sec. 1153.156. LIMITS ON AMOUNT OF CREDIT ACCIDENT AND
HEALTH INSURANCE
Sec. 1153.157. BEGINNING OF TERM OF CREDIT INSURANCE
COVERAGE
Sec. 1153.158. DELIVERY OF EVIDENCE OF INSURANCE TO DEBTOR
Sec. 1153.159. REQUIREMENTS RELATING TO APPLICATION FOR
INSURANCE OR NOTICE OF PROPOSED INSURANCE
Sec. 1153.160. TERMINATION OF CREDIT INSURANCE
Sec. 1153.161. INSURANCE MAY BE PROVIDED BY DEBTOR
[Sections 1153.162-1153.200 reserved for expansion]
SUBCHAPTER E. CHARGES, REFUNDS, ADJUSTMENTS, AND CLAIMS
Sec. 1153.201. MAXIMUM AMOUNT OF INSURANCE CHARGE TO
DEBTOR
Sec. 1153.202. REFUND OF INSURANCE CHARGE ON TERMINATION
OF DEBT OR INSURANCE; FILING OF FORMULA
Sec. 1153.203. CERTAIN REFUNDS OR ADJUSTMENTS REQUIRED
Sec. 1153.204. CLAIM UNDER POLICY
[Sections 1153.205-1153.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT OF CHAPTER; PENALTY
Sec. 1153.701. COMPLIANCE ORDER
Sec. 1153.702. CIVIL PENALTY
Sec. 1153.703. REVOCATION OR SUSPENSION OF AUTHORITY ON
VIOLATION OF ORDER
CHAPTER 1153. CREDIT LIFE INSURANCE AND CREDIT
ACCIDENT AND HEALTH INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1153.001. SHORT TITLE. This chapter may be cited as the Model Act for the Regulation of Credit Life Insurance and Credit Accident and Health Insurance. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. A(1).)
Sec. 1153.002. DEFINITIONS. In this chapter:
(1) "Credit accident and health insurance" means insurance to provide indemnity for payments that become due on a specific credit transaction of a debtor when the debtor is disabled, as defined in the insurance policy.
(2) "Credit life insurance" means insurance on the life of a debtor sold in connection with a specific credit transaction.
(3) "Credit transaction" includes the lending of money.
(4) "Creditor" means:
(A) a person who lends money or who sells or leases services or property the payment for which is arranged through a credit transaction;
(B) a successor to the right, title, or interest of a person described by Paragraph (A); or
(C) a person who is in any way associated with a person described by Paragraph (A) or (B), including a director, officer, employee, affiliate, associate, or subsidiary of the person described by Paragraph (A) or (B).
(5) "Debtor" means a person who borrows money or who purchases or leases services or property the payment for which is arranged through a credit transaction. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. B (part).)
Sec. 1153.003. APPLICABILITY OF CHAPTER. (a) This chapter applies to life insurance and accident and health insurance that is sold in connection with a credit transaction that is charged to or paid for by, in whole or part, the debtor, and that is not issued or sold:
(1) in connection with a credit transaction of more than 10 years' duration;
(2) in connection with a credit transaction that is:
(A) secured by a first mortgage or deed of trust; and
(B) made to:
(i) finance the purchase of commercial real property or the construction of or improvement to a building, other than a single-family dwelling, on the real property if the purchase, construction, or improvement is secured by a lien on the real property; or
(ii) refinance a credit transaction made for a purpose described by Subparagraph (i); or
(3) as an isolated transaction on the part of the insurer that is not related to an agreement or a plan for insuring debtors of the creditor.
(b) This chapter applies to insurance described by Subsection (a) regardless of the nature, kind, or plan of the credit insurance coverage or premium payment system and regardless of whether the credit insurance is charged to or paid for by the debtor directly or indirectly. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. A(2).)
Sec. 1153.004. RULES. After notice and a hearing, the commissioner may adopt rules to implement this chapter. (V.T.I.C. Art. 3.53, Sec. 12 (part).)
Sec. 1153.005. CONSTRUCTION. This chapter shall be liberally construed. (V.T.I.C. Art. 3.53, Sec. 1 (part).)
Sec. 1153.006. LEGISLATIVE INTENT. This chapter is not intended to prohibit or discourage reasonable competition. (V.T.I.C. Art. 3.53, Sec. 1 (part).)
Sec. 1153.007. FILING FEE. (a) The department shall set and collect a fee for a form or schedule filed under this chapter in an amount not to exceed $200.
(b) Fees collected under this section shall be deposited in the Texas Department of Insurance operating account. (V.T.I.C. Art. 3.53, Sec. 7, Subsec. H.)
Sec. 1153.008. GAIN OR ADVANTAGE FROM INSURANCE NOT PROHIBITED CHARGE. (a) The premium or cost of credit life insurance or credit accident and health insurance authorized under this chapter is not interest, a charge, consideration, or an amount in excess of permitted charges in connection with the underlying credit transaction.
(b) Any benefit, return, or other gain or advantage to the creditor arising out of the sale or provision of the insurance under this chapter is not a violation of any law of this state. (V.T.I.C. Art. 3.53, Sec. 9 (part).)
[Sections 1153.009-1153.050 reserved for expansion]
SUBCHAPTER B. FORMS
Sec. 1153.051. FILING OF FORM. (a) An insurer shall file with the commissioner the form of each policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement, and rider to which this chapter applies that is delivered or issued for delivery in this state.
(b) If a group policy of credit life insurance or credit accident and health insurance is delivered in another state, the insurer is required to file only the group certificate and notice of proposed insurance delivered or issued for delivery in this state, as specified in Section 1153.052.
(c) The commissioner shall approve a certificate filed under Subsection (b) if it conforms with the requirements provided by Section 1153.052 and if the schedule of premium rates applicable to the insurance evidenced by that certificate or notice does not exceed the presumptive premium rate established by the commissioner. (V.T.I.C. Art. 3.53, Sec. 7, Subsecs. A (part), F (part).)
Sec. 1153.052. REQUIREMENTS RELATING TO INSURANCE POLICY OR CERTIFICATE. A policy or certificate of credit life insurance or credit accident and health insurance must:
(1) specify:
(A) the name and home office address of the insurer;
(B) the name of the debtor;
(C) in the case of a certificate under a group policy, the identity, by name or otherwise, of each insured;
(D) the full amount of premium or the total identifiable insurance charge, if any, to the debtor, separately for credit life insurance and credit accident and health insurance; and
(E) each exception or limitation to or restriction on the coverage;
(2) describe the coverage, including the amount and term of the coverage; and
(3) state that the benefits are to be paid to the creditor to reduce or extinguish the unpaid amount of the debt and that any amount of benefits that exceeds the unpaid debt is to be paid to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate. (V.T.I.C. Art. 3.53, Sec. 6, Subsec. B.)
Sec. 1153.053. DISAPPROVAL OF FORM. (a) Not later than the 60th day after the date an insurer files a form under Section 1153.051, the commissioner shall disapprove the form if:
(1) the benefits provided are not reasonable in relation to the premium charge; or
(2) the form contains a provision that:
(A) is unjust, unfair, inequitable, misleading, or deceptive;
(B) encourages misrepresentation of the coverage; or
(C) is contrary to this code or a rule adopted under this code.
(b) The commissioner shall specify in the notice of disapproval of a form the reason for the disapproval and state that, if the insurer delivers to the commissioner a written request for a hearing on the disapproval of the form, the hearing will be granted not later than the 20th day after the date of the request. (V.T.I.C. Art. 3.53, Sec. 7, Subsecs. B, C (part).)
Sec. 1153.054. WITHDRAWAL OF APPROVAL OF FORM. The commissioner may hold a hearing on the withdrawal of the approval of a form not earlier than the 21st day after the date written notice of the hearing is given to the insurer who submitted the form. The notice of the hearing must state the reason for the proposed withdrawal of approval. At any time after the hearing, the commissioner may withdraw approval of the form for any ground provided by Section 1153.053(a). (V.T.I.C. Art. 3.53, Sec. 7, Subsec. D.)
Sec. 1153.055. PROHIBITIONS RELATING TO ISSUANCE OR USE OF FORM. (a) A policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement, or rider to which this chapter applies may not be issued or used before the 61st day after the date the form is filed with the commissioner under Section 1153.051, unless the commissioner gives prior written approval of the issuance or use of the form.
(b) An insurer who is notified by the commissioner that a form is disapproved may not issue or use that form.
(c) After the effective date of the withdrawal of the approval of a form under Section 1153.054, the insurer may not issue or use that form. (V.T.I.C. Art. 3.53, Sec. 7, Subsecs. C (part), E.)
[Sections 1153.056-1153.100 reserved for expansion]
SUBCHAPTER C. RATES
Sec. 1153.101. FILING OF SCHEDULE OF RATES. An insurer shall file with the commissioner each schedule of premium rates relating to a document required to be filed under Section 1153.051. (V.T.I.C. Art. 3.53, Sec. 7, Subsec. A (part).)
Sec. 1153.102. REVISION OF SCHEDULE OF RATES. (a) An insurer may revise its schedules of premium rates for various classes of business.
(b) The insurer shall file each revised schedule with the commissioner.
(c) An insurer may not issue a credit life insurance policy or credit accident and health insurance policy for which the premium rate exceeds the rate determined by using the appropriate schedule for that class of business that the insurer has on file with the commissioner. (V.T.I.C. Art. 3.53, Sec. 8, Subsec. A(1).)
Sec. 1153.103. PRESUMPTIVE PREMIUM RATE. (a) After notice and a hearing, the commissioner may promulgate a presumptive premium rate for various classes of business and terms of coverage.
(b) The commissioner shall hold a hearing required under Subsection (a) in accordance with the contested case provisions of Chapter 2001, Government Code.
(c) In determining the presumptive premium rate, the commissioner shall consider any relevant data, including reasonable acquisition costs, loss ratios, administrative expenses, reserves, loss settlement expenses, the type or class of business, the duration of various credit transactions, and reasonable and adequate profits to the insurers.
(d) In determining the presumptive premium rate, the commissioner may not set or limit the amount of compensation paid by a company to an agent but may request from an insurer or agent any relevant data relating to the presumptive premium rate, including information relating to compensation paid for the sale of credit insurance, expenses, losses, and profits. An insurer or agent shall provide the requested information to the commissioner in a timely manner.
(e) The commissioner may not promulgate a presumptive premium rate that is unjust, unreasonable, inadequate, confiscatory, or excessive to the insureds, the insurers, or the agents.
(f) It is a rebuttable presumption that the presumptive premium rate is just, reasonable, adequate, and not excessive. (V.T.I.C. Art. 3.53, Sec. 8, Subsecs. A(2), (3).)
Sec. 1153.104. APPEAL OF PRESUMPTIVE RATE. Any person who is aggrieved by any action taken in the setting of a presumptive rate may appeal the action, in accordance with Subchapter D, Chapter 36, not later than the 30th day after the date the commissioner took the action. (V.T.I.C. Art. 3.53, Sec. 8, Subsec. A(4).)
[Sections 1153.105-1153.150 reserved for expansion]
SUBCHAPTER D. CREDIT INSURANCE REQUIREMENTS
Sec. 1153.151. FORMS OF CREDIT LIFE INSURANCE. Credit life insurance may be issued only as:
(1) an individual policy of life insurance issued to a debtor on a term plan; or
(2) a group policy of life insurance issued to a creditor on a term plan providing insurance on the lives of debtors. (V.T.I.C. Art. 3.53, Sec. 3 (part).)
Sec. 1153.152. FORMS OF CREDIT ACCIDENT AND HEALTH INSURANCE. Credit accident and health insurance may be issued only as:
(1) an individual policy of accident and health insurance issued to a debtor on a term plan;
(2) a disability benefit provision in an individual policy of credit life insurance;
(3) a group policy of accident and health insurance issued to a creditor on a term plan insuring debtors; or
(4) a disability benefit provision in a group policy of credit life insurance. (V.T.I.C. Art. 3.53, Sec. 3 (part).)
Sec. 1153.153. EVIDENCE OF INSURANCE. Credit life insurance or credit accident and health insurance shall be evidenced by an individual policy or group certificate of insurance. (V.T.I.C. Art. 3.53, Sec. 6, Subsec. A (part).)
Sec. 1153.154. REQUIREMENTS FOR DELIVERY OR ISSUANCE OF CREDIT INSURANCE POLICY. A policy of credit life insurance or credit accident and health insurance that is delivered or issued for delivery in this state may be delivered or issued for delivery only by an insurer authorized to engage in the business of insurance in this state and may be issued only through a holder of a license issued by the commissioner. (V.T.I.C. Art. 3.53, Sec. 9 (part).)
Sec. 1153.155. LIMITS ON AMOUNT OF CREDIT LIFE INSURANCE. (a) The initial amount of credit life insurance on a debtor may not exceed the total amount of debt repayable under the contract that evidences the credit transaction.
(b) If the debt is repayable in substantially equal installments, the amount of insurance may not at any time exceed the greater of the scheduled or actual unpaid amount of the debt under the contract. (V.T.I.C. Art. 3.53, Sec. 4, Subsec. A.)
Sec. 1153.156. LIMITS ON AMOUNT OF CREDIT ACCIDENT AND HEALTH INSURANCE. (a) The total amount of indemnity payable by credit accident and health insurance may not exceed the total amount of debt repayable under the contract that evidences the credit transaction.
(b) The amount of a periodic indemnity payment may not exceed the scheduled periodic installment payment on the debt. (V.T.I.C. Art. 3.53, Sec. 4, Subsec. B.)
Sec. 1153.157. BEGINNING OF TERM OF CREDIT INSURANCE COVERAGE. (a) Except as otherwise provided by this section, the term of credit life insurance or credit accident and health insurance begins, subject to acceptance by the insurer, on the date that the debtor becomes obligated to the creditor.
(b) With respect to an obligation that exists when a group policy takes effect, coverage begins on the later of the effective date of the policy or the date of enrollment for coverage under the policy.
(c) If evidence of insurability is required and is provided after the 30th day after the date the debtor becomes obligated to the creditor, the term of the insurance may begin on the date the insurance company determines that the evidence is satisfactory. (V.T.I.C. Art. 3.53, Sec. 5 (part).)
Sec. 1153.158. DELIVERY OF EVIDENCE OF INSURANCE TO DEBTOR. (a) At the time a debt for which credit insurance is sold is incurred:
(1) the individual policy or group certificate of insurance, as appropriate, shall be delivered to the debtor; or
(2) a copy of the application for the policy or certificate of insurance or a notice of proposed insurance that satisfies Section 1153.159 shall be delivered to the debtor.
(b) If delivery to the debtor is made under Subsection (a)(2), the insurer shall deliver the individual policy or group certificate of insurance to the debtor on acceptance of the insurance by the insurer and not later than the 45th day after the date the debt is incurred.
(c) If the insurer named in the application or notice under Subsection (a)(2) does not accept the risk, the debtor shall receive a policy or certificate of insurance that specifies the name and home office address of the substituted insurer and the amount of the premium to be charged for the insurance. (V.T.I.C. Art. 3.53, Sec. 6, Subsecs. A (part), C, D (part), E (part).)
Sec. 1153.159. REQUIREMENTS RELATING TO APPLICATION FOR INSURANCE OR NOTICE OF PROPOSED INSURANCE. A copy of an application for insurance or a notice of proposed insurance delivered under Section 1153.158 must:
(1) be signed by the debtor;
(2) specify:
(A) the name and home office address of the insurer;
(B) the name of each debtor;
(C) the full amount of the premium or the total identifiable insurance charge, if any, to be paid by the debtor, separately for credit life insurance and credit accident and health insurance; and
(D) the amount, term, and a brief description of the coverage to be provided;
(3) refer exclusively to insurance coverage;
(4) be separate from the instrument or agreement for the loan or sale or other credit statement of account, unless the information required by this section is prominently set forth in that instrument, agreement, or statement; and
(5) provide that on acceptance by the insurer, the insurance becomes effective as provided by Section 1153.157. (V.T.I.C. Art. 3.53, Sec. 6, Subsec. D (part).)
Sec. 1153.160. TERMINATION OF CREDIT INSURANCE. (a) The term of credit life insurance or credit accident and health insurance must end not later than the 15th day after the scheduled maturity date of the debt unless the coverage after that date is without additional cost to the debtor.
(b) If the debt is discharged by renewing or refinancing the debt before the scheduled maturity date, the insurance in force must terminate before new insurance may be issued in connection with the renewed or refinanced debt. (V.T.I.C. Art. 3.53, Sec. 5 (part).)
Sec. 1153.161. INSURANCE MAY BE PROVIDED BY DEBTOR. If credit life insurance or credit accident and health insurance is required as additional security for a debt, the debtor, on request to the creditor, may provide the required amount of insurance through:
(1) an existing insurance policy owned or controlled by the debtor; or
(2) an insurance policy obtained from an insurer authorized to engage in the business of insurance in this state. (V.T.I.C. Art. 3.53, Sec. 11.)
[Sections 1153.162-1153.200 reserved for expansion]
SUBCHAPTER E. CHARGES, REFUNDS, ADJUSTMENTS, AND CLAIMS
Sec. 1153.201. MAXIMUM AMOUNT OF INSURANCE CHARGE TO DEBTOR. A creditor may not charge a debtor for credit life or credit accident and health insurance issued to the debtor an amount that exceeds the amount of the premium that the insurer charges the creditor for that insurance, as computed at the time the charge to the debtor is determined. (V.T.I.C. Art. 3.53, Sec. 8, Subsec. D.)
Sec. 1153.202. REFUND OF INSURANCE CHARGE ON TERMINATION OF DEBT OR INSURANCE; FILING OF FORMULA. (a) Each individual policy or group policy and group certificate shall provide that if the underlying debt or the insurance terminates before the scheduled maturity date of the debt, including the termination of a debt by renewing or refinancing the debt, the refund of any amount paid by or charged to the debtor for insurance shall be paid or credited promptly to the person entitled to the refund.
(b) A refund is not required if the amount of the refund is less than $3.
(c) The formula to be used in computing the refund of the amount paid by or charged to the debtor for insurance if the underlying debt or the insurance terminates before the scheduled maturity date of the debt must be filed with and approved by the commissioner. (V.T.I.C. Art. 3.53, Secs. 5 (part), 8, Subsec. B, as amended Acts 67th Leg., R.S., Chs. 493, 849.)
Sec. 1153.203. CERTAIN REFUNDS OR ADJUSTMENTS REQUIRED. (a) If the beginning of the term of insurance is delayed under Section 1153.157(c), the charge to the debtor for insurance shall be adjusted or the appropriate amount shall be refunded to the debtor.
(b) If insurance is substituted under Section 1153.158(c) and the amount of premium for the substituted insurance is less than the amount specified in the application or notice of proposed insurance, the appropriate amount shall be refunded to the debtor.
(c) If a creditor requires a debtor to make any payment for credit life insurance or credit accident and health insurance and an individual policy or group certificate of insurance is not issued, the creditor shall:
(1) immediately give written notice to the debtor; and
(2) promptly make an appropriate credit to the debtor's account. (V.T.I.C. Art. 3.53, Sec. 5 (part); Sec. 6, Subsec. E (part); Sec. 8, Subsec. C.)
Sec. 1153.204. CLAIM UNDER POLICY. (a) A claim for recovery under a policy to which this chapter applies shall be reported promptly to the insurer or the insurer's designated claim representative.
(b) An insurer shall maintain adequate claim files.
(c) A claim shall be settled as soon as possible and in accordance with the insurance contract.
(d) A claim shall be paid by a draft drawn on the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due under the policy or on direction of the claimant to the person specified.
(e) A plan or arrangement may not be used to authorize an individual, firm, or corporation, other than the insurer or the insurer's designated claim representative, to settle or adjust a claim. The creditor may not be designated as claim representative for the insurer in settling or adjusting a claim. Notwithstanding this subsection, a group policyholder, under an arrangement with the group insurer, may draw drafts or checks in payment of claims due to the group policyholder subject to audit and review by the insurer. (V.T.I.C. Art. 3.53, Sec. 10.)
[Sections 1153.205-1153.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT OF CHAPTER; PENALTY
Sec. 1153.701. COMPLIANCE ORDER. (a) If, after written notice to an insurer or other person who holds a license or other authorization issued by the commissioner and a hearing, the commissioner determines that a violation of this chapter or a rule adopted under this chapter has occurred, the commissioner shall issue the details of that determination and an order for compliance by a specified date.
(b) An order issued under this section is binding on the insurer or other person to whom it is issued on the date specified in the order unless:
(1) the order is withdrawn by the commissioner before that date; or
(2) the order is appealed under Subchapter D, Chapter 36. (V.T.I.C. Art. 3.53, Sec. 12 (part).)
Sec. 1153.702. CIVIL PENALTY. (a) An individual, firm, or corporation who violates a final order issued under this chapter is liable to the state for a civil penalty of not more than:
(1) $250; or
(2) $1,000, if the court finds the violation to be wilful.
(b) The penalty provided by this section may be recovered in a civil action. (V.T.I.C. Art. 3.53, Sec. 14 (part).)
Sec. 1153.703. REVOCATION OR SUSPENSION OF AUTHORITY ON VIOLATION OF ORDER. After notice and a hearing, the commissioner may revoke or suspend the license or certificate of authority of an individual, firm, or corporation that violates an order issued under this chapter. (V.T.I.C. Art. 3.53, Sec. 14 (part).)
SECTION . TITLE 8, INSURANCE CODE. The Insurance Code is amended by adding Title 8 to read as follows:
TITLE 8. HEALTH INSURANCE AND OTHER HEALTH COVERAGES
[Subtitles A-G reserved]
SUBTITLE H. HEALTH BENEFITS AND OTHER COVERAGES FOR
GOVERNMENTAL EMPLOYEES
CHAPTER 1551. TEXAS EMPLOYEES GROUP BENEFITS ACT
CHAPTER 1552. GROUP LONG-TERM CARE INSURANCE FOR STATE
EMPLOYEES
[Chapters 1553-1574 reserved for expansion]
CHAPTER 1575. TEXAS PUBLIC SCHOOL EMPLOYEES GROUP
BENEFITS PROGRAM
CHAPTER 1576. GROUP LONG-TERM CARE INSURANCE FOR PUBLIC
SCHOOL EMPLOYEES
CHAPTER 1577. REQUIRED AVAILABILITY OF INSURANCE FOR
SCHOOL DISTRICT EMPLOYEES AND RETIREES
CHAPTER 1578. PURCHASE OF INSURANCE BY ASSOCIATION OF
TEACHERS AND SCHOOL ADMINISTRATORS
[Chapters 1579-1600 reserved for expansion]
CHAPTER 1601. UNIFORM INSURANCE BENEFITS ACT FOR EMPLOYEES
OF THE UNIVERSITY OF TEXAS SYSTEM
AND THE TEXAS A&M UNIVERSITY SYSTEM
[Chapters 1602-1624 reserved for expansion]
CHAPTER 1625. TRANSFER BETWEEN CERTAIN GOVERNMENTAL PROGRAMS
TITLE 8. HEALTH INSURANCE AND OTHER HEALTH COVERAGES
[Subtitles A-G reserved]
SUBTITLE H. HEALTH BENEFITS AND OTHER COVERAGES FOR
GOVERNMENTAL EMPLOYEES
CHAPTER 1551. TEXAS EMPLOYEES GROUP
BENEFITS ACT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1551.001. SHORT TITLE
Sec. 1551.002. PURPOSES
Sec. 1551.003. GENERAL DEFINITIONS
Sec. 1551.004. DEFINITION OF DEPENDENT
Sec. 1551.005. DEFINITION OF HEALTH BENEFIT PLAN
Sec. 1551.006. DEFINITION OF INSTITUTION OF HIGHER
EDUCATION
Sec. 1551.007. DEFINITION OF CARRIER
Sec. 1551.008. APPLICABILITY OF DEFINITIONS
Sec. 1551.009. BOARD OF TRUSTEES MAY DEFINE OTHER WORDS
Sec. 1551.010. BOARD OF TRUSTEES APPROVAL FOR PAYROLL
DEDUCTIONS OR REDUCTIONS
Sec. 1551.011. EXEMPTION FROM EXECUTION
Sec. 1551.012. EXEMPTION FROM STATE TAXES AND FEES
Sec. 1551.013. COMBINING OF CARRIERS NOT RESTRAINT
OF TRADE
[Sections 1551.014-1551.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION AND IMPLEMENTATION
Sec. 1551.051. ADMINISTRATION AND IMPLEMENTATION
Sec. 1551.052. AUTHORITY FOR RULES, PLANS, PROCEDURES,
AND ORDERS
Sec. 1551.053. AUTHORITY TO HIRE EMPLOYEES
Sec. 1551.054. LIABILITY INSURANCE
Sec. 1551.055. GENERAL POWERS OF BOARD OF TRUSTEES
REGARDING COVERAGE PLANS
Sec. 1551.056. INDEPENDENT ADMINISTRATOR
Sec. 1551.057. COMPENSATION OF PERSON EMPLOYED BY
BOARD OF TRUSTEES
Sec. 1551.058. ELECTRONIC AUTHORIZATIONS
Sec. 1551.059. CERTIFICATE OF COVERAGE
Sec. 1551.060. IDENTIFICATION CARDS
Sec. 1551.061. ANNUAL REPORT
Sec. 1551.062. INFORMATION ON OPERATION AND ADMINISTRATION
OF CHAPTER
Sec. 1551.063. CONFIDENTIALITY OF CERTAIN RECORDS
Sec. 1551.064. GROUP ACCIDENT AND HEALTH INSURANCE
CONTRACTS
[Sections 1551.065-1551.100 reserved for expansion]
SUBCHAPTER C. COVERAGE AND PARTICIPATION
Sec. 1551.101. PARTICIPATION ELIGIBILITY: STATE OFFICERS
AND EMPLOYEES
Sec. 1551.102. PARTICIPATION ELIGIBILITY: ANNUITANTS
Sec. 1551.103. RIGHT TO COVERAGE
Sec. 1551.104. AUTOMATIC COVERAGE
Sec. 1551.105. DATE AUTOMATIC COVERAGE BEGINS
Sec. 1551.106. GROUP COVERAGE PLAN PURCHASED TO PROVIDE
FOR AUTOMATIC COVERAGE
Sec. 1551.107. CONTINGENT COVERAGE
Sec. 1551.108. CONTINUING ELIGIBILITY OF CERTAIN PERSONS
WITH LEGISLATIVE SERVICE OR EMPLOYMENT
Sec. 1551.109. CONTINUING ELIGIBILITY OF CERTAIN MEMBERS
OF BOARDS, COMMISSIONS, AND INSTITUTIONS
OF HIGHER EDUCATION
Sec. 1551.110. INELIGIBILITY OF CERTAIN JUNIOR COLLEGE
EMPLOYEES
Sec. 1551.111. PARTICIPATION BY CERTAIN RETIREMENT
SYSTEMS
Sec. 1551.112. PARTICIPATION BY TEXAS TURNPIKE
AUTHORITY
Sec. 1551.113. PARTICIPATION BY CERTAIN EMPLOYEES WHOSE
POSITIONS ARE PRIVATIZED OR ELIMINATED
[Sections 1551.114-1551.150 reserved for expansion]
SUBCHAPTER D. COVERAGE FOR DEPENDENTS
Sec. 1551.151. ENTITLEMENT TO COVERAGE
Sec. 1551.152. ELIGIBILITY OF FOSTER CHILD
Sec. 1551.153. PARTICIPANT RESIDING OUTSIDE OF SERVICE
AREA
Sec. 1551.154. EMPLOYEE PAYMENTS
Sec. 1551.155. COVERAGE OPTIONS FOR SURVIVING SPOUSE
Sec. 1551.156. COVERAGE OPTIONS FOR DEPENDENT WHEN THERE IS
NO SURVIVING SPOUSE
Sec. 1551.157. COVERAGE OPTIONS AFTER EXPIRATION OF ANNUITY
OPTION
Sec. 1551.158. REINSTATEMENT OF HEALTH BENEFIT
PLAN COVERAGE BY CERTAIN DEPENDENTS
Sec. 1551.159. COVERAGE FOR CERTAIN DEPENDENT CHILDREN
OF EMPLOYEES
[Sections 1551.160-1551.200 reserved for expansion]
SUBCHAPTER E. GROUP COVERAGES
Sec. 1551.201. ESTABLISHMENT
Sec. 1551.202. AUTHORITY TO DEFINE BASIC COVERAGES
Sec. 1551.203. AUTHORITY TO DEFINE OPTIONAL COVERAGES
Sec. 1551.204. AUTHORITY TO DEFINE VOLUNTARY COVERAGES
Sec. 1551.205. LIMITATIONS
Sec. 1551.206. CAFETERIA PLAN
Sec. 1551.207. PREMIUM CONVERSION BENEFIT PORTION OF
CAFETERIA PLAN
Sec. 1551.208. DETERMINATION TO SELF-FUND
Sec. 1551.209. SELF-FUNDED COVERAGE EXEMPT FROM INSURANCE
LAW
Sec. 1551.210. ACTUARIAL ADVICE FOR SELF-FUNDED COVERAGE
Sec. 1551.211. CONTINGENCY RESERVE FUND FOR
SELF-FUNDED COVERAGE
Sec. 1551.212. FIRMS TO ADMINISTER SELF-FUNDED COVERAGE
Sec. 1551.213. BIDS FOR PURCHASED COVERAGE
Sec. 1551.214. SELECTION OF BIDS FOR PURCHASED COVERAGE
Sec. 1551.215. ACCOUNTING BY CARRIER PROVIDING
PURCHASED COVERAGE
Sec. 1551.216. SPECIAL CONTINGENCY RESERVE
Sec. 1551.217. USE OF EMPLOYEE'S SALARY IN COMPUTATION OF
PREMIUM OR COVERAGE
[Sections 1551.218-1551.250 reserved for expansion]
SUBCHAPTER F. GROUP LIFE AND ACCIDENTAL DEATH AND
DISMEMBERMENT INSURANCE COVERAGE PLAN
Sec. 1551.251. GROUP LIFE INSURANCE COVERAGE PLAN
Sec. 1551.252. ADDITIONAL TERM LIFE INSURANCE
Sec. 1551.253. DETERMINATION OF ANNUAL SALARY
Sec. 1551.254. ACCELERATED LIFE INSURANCE BENEFITS
Sec. 1551.255. INCLUSION OF PROVISIONS FOR VIATICAL
SETTLEMENTS
Sec. 1551.256. OPTIONAL TERM LIFE INSURANCE COVERAGE
AFTER RETIREMENT
Sec. 1551.257. ELIGIBILITY OF ANNUITANT FOR EXTENDED
INSURANCE BENEFITS
Sec. 1551.258. TERMINATION OF ACCIDENTAL DEATH AND
DISMEMBERMENT INSURANCE COVERAGE ON
RETIREMENT
Sec. 1551.259. ORDER OF PRECEDENCE OF PAYMENT TO
SURVIVORS
[Sections 1551.260-1551.300 reserved for expansion]
SUBCHAPTER G. CONTRIBUTIONS AND COSTS
Sec. 1551.301. FUNDING OF BASIC COVERAGE
Sec. 1551.302. ALLOCATION OF EMPLOYER CONTRIBUTIONS
Sec. 1551.303. FUNDING OF OPTIONAL COVERAGES
Sec. 1551.304. FUNDING OF VOLUNTARY COVERAGES
Sec. 1551.305. COST OF BASIC COVERAGE EXCEEDING EMPLOYER
CONTRIBUTIONS
Sec. 1551.306. PAYMENT OF EXCESS COST OVER BASIC COVERAGE
CONTRIBUTION
Sec. 1551.307. PAYMENT FOR VOLUNTARY COVERAGES
Sec. 1551.308. NO CONTRIBUTION ON REFUSAL OF COVERAGE
Sec. 1551.309. EMPLOYEE PAYMENTS FOR PARTICIPATION IN
CAFETERIA PLAN
Sec. 1551.310. STATE CONTRIBUTION REQUIRED
Sec. 1551.311. AMOUNT OF STATE CONTRIBUTION
Sec. 1551.312. AMOUNT OF STATE CONTRIBUTION FOR CERTAIN
DEPENDENT CHILDREN
Sec. 1551.313. AMOUNT OF STATE CONTRIBUTION FOR CERTAIN
SURVIVING DEPENDENTS
Sec. 1551.314. CERTAIN STATE CONTRIBUTIONS PROHIBITED
Sec. 1551.315. REQUIRED CONTRIBUTIONS BY STATE AGENCIES
Sec. 1551.316. ALLOCATION TO BOARD OF TRUSTEES OF EMPLOYER
CONTRIBUTIONS
Sec. 1551.317. PAYMENT OF EMPLOYER CONTRIBUTIONS ALLOCATED
BY THE STATE
Sec. 1551.318. PAYMENT OF EMPLOYER CONTRIBUTIONS NOT
ALLOCATED BY THE STATE
Sec. 1551.319. AMOUNT OF CONTRIBUTION FOR FULL-TIME AND
PART-TIME EMPLOYEES
Sec. 1551.320. CERTAIN COSTS
[Sections 1551.321-1551.350 reserved for expansion]
SUBCHAPTER H. EXPULSION AND ADJUDICATION OF CLAIMS
Sec. 1551.351. EXPULSION
Sec. 1551.352. EXECUTIVE DIRECTOR DETERMINES QUESTIONS
RELATING TO ENROLLMENT OR PAYMENT OF
CLAIMS
Sec. 1551.353. RESCISSION OF COVERAGE OR DENIAL OF CLAIM
BY EXECUTIVE DIRECTOR
Sec. 1551.354. DOUBLE OR MULTIPLE LIABILITY
Sec. 1551.355. APPEAL OF EXECUTIVE DIRECTOR'S
DETERMINATION
Sec. 1551.356. STANDING
Sec. 1551.357. DETERMINATION OF APPEAL BY BOARD OF
TRUSTEES
Sec. 1551.358. NEGOTIATION
Sec. 1551.359. STANDARD OF REVIEW OF DETERMINATION OF BOARD
OF TRUSTEES
Sec. 1551.360. DELEGATION
[Sections 1551.361-1551.400 reserved for expansion]
SUBCHAPTER I. FUNDS
Sec. 1551.401. EMPLOYEES LIFE, ACCIDENT, AND HEALTH
INSURANCE AND BENEFITS FUND
Sec. 1551.402. STATE EMPLOYEES CAFETERIA PLAN TRUST FUND
Sec. 1551.403. FEES FOR STATE EMPLOYEES CAFETERIA PLAN TRUST
FUND
Sec. 1551.404. INSUFFICIENT EARNINGS FOR EMPLOYEE TO
PARTICIPATE IN CAFETERIA FUND
Sec. 1551.405. EMPLOYEES' HEALTH CARE STABILIZATION TRUST
FUND
Sec. 1551.406. INVESTMENT OF FUNDS
Sec. 1551.407. MANAGEMENT OF ASSETS
[Sections 1551.408-1551.450 reserved for expansion]
SUBCHAPTER J. GROUP BENEFITS ADVISORY COMMITTEE
Sec. 1551.451. DEFINITION
Sec. 1551.452. NUMBER OF MEMBERS
Sec. 1551.453. MEMBERS REPRESENTING STATE AGENCIES
Sec. 1551.454. MEMBERS REPRESENTING
INSTITUTIONS OF HIGHER EDUCATION
Sec. 1551.455. MEMBERS REPRESENTING PRIVATE SECTOR
Sec. 1551.456. RETIRED STATE EMPLOYEE
Sec. 1551.457. EXECUTIVE DIRECTOR
Sec. 1551.458. TERM
Sec. 1551.459. VACANCY
Sec. 1551.460. PRESIDING OFFICER
Sec. 1551.461. DUTIES OF COMMITTEE
Sec. 1551.462. DUTIES OF COMMITTEE MEMBERS
CHAPTER 1551. TEXAS EMPLOYEES GROUP
BENEFITS ACT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1551.001. SHORT TITLE. This chapter may be cited as the Texas Employees Group Benefits Act. (V.T.I.C. Art. 3.50-2, Sec. 1.)
Sec. 1551.002. PURPOSES. The purposes of this chapter are to:
(1) provide uniformity in life, accident, and health benefit coverages for all state officers and employees and their dependents;
(2) enable the state to attract and retain competent and able employees by providing employees and their dependents with life, accident, and health benefit coverages at least equal to those commonly provided in private industry;
(3) foster, promote, and encourage employment by and service to the state as a career profession for individuals of high standards of competence and ability;
(4) recognize and protect the state's investment in each permanent employee by promoting and preserving economic security and good health among employees and their dependents;
(5) foster and develop high standards of employer-employee relationships between the state and its employees; and
(6) recognize the long and faithful service and dedication of state officers and employees and encourage them to remain in state service until eligible for retirement by providing health benefits for them and their dependents. (V.T.I.C. Art. 3.50-2, Sec. 2.)
Sec. 1551.003. GENERAL DEFINITIONS. In this chapter:
(1) "Administering firm" means a firm designated by the board of trustees to administer coverages, services, benefits, or requirements in accordance with this chapter and the rules adopted by the board of trustees under this chapter.
(2) "Annuitant" means an individual eligible to participate in the group benefits program under Section 1551.102.
(3) "Basic coverage" means the group coverage plans determined by the board of trustees in which each full-time employee and annuitant participates automatically unless participation is specifically waived.
(4) "Board of trustees" means the board of trustees established under Chapter 815, Government Code, to administer the Employees Retirement System of Texas.
(5) "Cafeteria plan" means a plan defined and authorized by Section 125, Internal Revenue Code of 1986.
(6) "Employee" means an individual eligible to participate in the group benefits program under Section 1551.101.
(7) "Employer" means this state and its agencies.
(8) "Executive director" means the executive director of the Employees Retirement System of Texas.
(9) "Full-time employee" means an employee designated by the employer as working 20 or more hours a week.
(10) "Group benefits program" means the state employees group benefits program provided by this chapter.
(11) "Part-time employee" means an employee designated by the employer as working less than 20 hours a week.
(12) "Serious mental illness" has the meaning assigned by Section 1, Article 3.51-14.
(13) "Service" means personal service to the state creditable in accordance with rules adopted by the board of trustees.
(14) "State agency" means a commission, board, department, division, institution of higher education, or other agency of this state created by the constitution or statutes of this state. The term also includes the Texas Municipal Retirement System and the Texas County and District Retirement System. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(1), (4), (6), (10), (11), (14) (part), (15) (part), (16), (17), (23); 3A(a) (part); New.)
Sec. 1551.004. DEFINITION OF DEPENDENT. (a) In this chapter, "dependent" with respect to an individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 means the individual's:
(1) spouse;
(2) unmarried child younger than 25 years of age;
(3) child of any age who lives with or has the child's care provided by the individual on a regular basis if the child is mentally retarded or physically incapacitated to the extent that the child is dependent on the individual for care or support, as determined by the board of trustees; and
(4) child of any age who is unmarried, for purposes of health benefit coverage under this chapter, on expiration of the child's continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L. No. 99-272).
(b) In this section, "child" includes an adopted child and a stepchild, foster child, or other child who is in a parent-child relationship with an individual who is eligible to participate in the group benefits program under Section 1551.101 or 1551.102. (V.T.I.C. Art. 3.50-2, Sec. 3(a)(8).)
Sec. 1551.005. DEFINITION OF HEALTH BENEFIT PLAN. (a) In this chapter, "health benefit plan" means a plan that provides, pays for, or reimburses expenses for health care services, including comparable health care services for participants who rely solely on spiritual means through prayer for healing in accordance with the teaching of a well-recognized church or denomination.
(b) A health benefit plan shall be provided on a group basis through:
(1) a policy or contract;
(2) a medical, dental, or hospital service agreement;
(3) a membership or subscription contract;
(4) a salary continuation plan;
(5) a health maintenance organization agreement;
(6) a preferred provider arrangement; or
(7) any other similar group arrangement or a combination of policies, plans, contracts, agreements, or arrangements described by this subsection. (V.T.I.C. Art. 3.50-2, Sec. 3(a)(7).)
Sec. 1551.006. DEFINITION OF INSTITUTION OF HIGHER EDUCATION. (a) In this chapter, except as provided by Subsection (b), "institution of higher education" means a public junior college, a senior college or university, or any other agency of higher education within the meaning and jurisdiction of Chapter 61, Education Code.
(b) In this chapter, "institution of higher education" does not include:
(1) an entity in The University of Texas System, as described by Section 65.02, Education Code; and
(2) an entity in The Texas A&M University System, as described by Subtitle D, Title 3, Education Code, including the Texas Veterinary Medical Diagnostic Laboratory. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(18), (19), (20).)
Sec. 1551.007. DEFINITION OF CARRIER. In this chapter, "carrier" means:
(1) an insurance company that is authorized by the department under this code to provide any of the types of insurance coverages, benefits, or services provided for in this chapter and that:
(A) has a surplus of $1 million;
(B) has a successful operating history; and
(C) has had successful experience, as determined by the department, in providing and servicing any of the types of group coverage provided for in this chapter;
(2) a corporation operating under Chapter 842 or 843 that provides any of the types of coverage, benefits, or services provided for in this chapter and that:
(A) has a successful operating history; and
(B) has had successful experience, as determined by the department, in providing and servicing any of the types of group coverage provided for in this chapter; or
(3) any combination of carriers described by Subdivisions (1) and (2) on terms the board of trustees prescribes. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(3), (9) (part).)
Sec. 1551.008. APPLICABILITY OF DEFINITIONS. The definition of a term defined by this subchapter and the use of the terms "employee" and "annuitant" to refer to individuals eligible to participate in the group benefits program under Sections 1551.101 and 1551.102 apply to this chapter unless a different meaning is plainly required by the context in which the term appears. (V.T.I.C. Art. 3.50-2, Sec. 3(a) (part).)
Sec. 1551.009. BOARD OF TRUSTEES MAY DEFINE OTHER WORDS. The board of trustees may define by rule a word in terms necessary in the administration of this chapter. (V.T.I.C. Art. 3.50-2, Sec. 3(b).)
Sec. 1551.010. BOARD OF TRUSTEES APPROVAL FOR PAYROLL DEDUCTIONS OR REDUCTIONS. A state agency may not establish, continue, or authorize payroll deductions or reductions for any benefit or coverage as provided by this chapter without the express approval of the board of trustees. (V.T.I.C. Art. 3.50-2, Sec. 5(d).)
Sec. 1551.011. EXEMPTION FROM EXECUTION. All benefit payments, contributions of employees and annuitants, and optional benefit payments, any rights, benefits, or payments accruing to a person under this chapter, and all money in a fund created by this chapter:
(1) are exempt from execution, attachment, garnishment, or any other process; and
(2) may not be assigned, except:
(A) for direct payment that a participant may assign to a provider of health care services; and
(B) as specifically provided by this chapter. (V.T.I.C. Art. 3.50-2, Sec. 10(a).)
Sec. 1551.012. EXEMPTION FROM STATE TAXES AND FEES. Any coverage established under this chapter, including a policy, an insurance contract, a certificate of coverage, an evidence of coverage, and an agreement with a health maintenance organization or a plan administrator, is not subject to any state tax, regulatory fee, or surcharge, including a premium or maintenance tax or fee. (V.T.I.C. Art. 3.50-2, Sec. 10(b).)
Sec. 1551.013. COMBINING OF CARRIERS NOT RESTRAINT OF TRADE. Carriers combining to bid, underwrite, or both bid and underwrite for the group benefits program are not in violation of Chapter 15, Business & Commerce Code. (V.T.I.C. Art. 3.50-2, Sec. 3(a)(9) (part).)
[Sections 1551.014-1551.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION AND IMPLEMENTATION
Sec. 1551.051. ADMINISTRATION AND IMPLEMENTATION. The administration and implementation of this chapter are vested solely in the board of trustees. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.052. AUTHORITY FOR RULES, PLANS, PROCEDURES, AND ORDERS. (a) The board of trustees may adopt rules consistent with this chapter as it considers necessary to implement this chapter and its purposes, including rules that provide standards for determining eligibility for participation in the group benefits program, including standards for determining disability.
(b) The board of trustees may adopt a plan, procedure, or order reasonably necessary to implement this chapter and its purposes. (V.T.I.C. Art. 3.50-2, Secs. 4 (part), 4A (part).)
Sec. 1551.053. AUTHORITY TO HIRE EMPLOYEES. (a) The board of trustees may hire employees as the board considers necessary to ensure the proper administration of this chapter and the coverages, services, and benefits provided for or authorized by this chapter.
(b) The board of trustees shall determine and assign the compensation and duties of the employees. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.054. LIABILITY INSURANCE. The board of trustees may purchase liability insurance for the board and employees and agents of the board in amounts that the board, in its sole discretion, considers reasonable and necessary. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.055. GENERAL POWERS OF BOARD OF TRUSTEES REGARDING COVERAGE PLANS. The board of trustees may:
(1) prepare specifications for a coverage provided under this chapter;
(2) prescribe the time and conditions under which an individual is eligible for a coverage provided under this chapter;
(3) determine the methods and procedures of claims administration;
(4) determine the amount of payroll deductions and reductions applicable to employees and annuitants and establish procedures to implement those deductions and reductions;
(5) establish procedures for the board of trustees to decide contested cases arising from a coverage provided under this chapter;
(6) study, on an ongoing basis, the operation of all coverages provided under this chapter, including gross and net costs, administration costs, benefits, utilization of benefits, and claims administration;
(7) administer the employees life, accident, and health insurance and benefits fund;
(8) provide the beginning and ending dates of coverages of participants under all benefit plans;
(9) develop basic group coverage plans applicable to all individuals eligible to participate in the group benefits program under Sections 1551.101 and 1551.102;
(10) provide for optional group coverage plans in addition to the basic group coverage plans;
(11) provide, as the board of trustees determines is appropriate, either additional statewide optional coverage plans or individual agency coverage plans;
(12) develop health benefit plans that permit access to high-quality, cost-effective health care;
(13) design, implement, and monitor health benefit plan features intended to discourage excessive utilization, promote efficiency, and contain costs;
(14) develop and refine, on an ongoing basis, a health benefit strategy consistent with evolving benefit delivery systems; and
(15) develop a funding strategy that efficiently uses employer contributions to achieve the purposes of this chapter and that is reasonable and ensures participants a fair choice among health benefit plans as provided by Section 1551.302. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.056. INDEPENDENT ADMINISTRATOR. (a) The board of trustees may, on a competitive bid basis, contract with an entity to act for the board as an independent administrator or manager of the coverages, services, and benefits authorized under this chapter.
(b) The entity must be a qualified, experienced firm of group insurance specialists or an administering firm and shall assist the board of trustees in ensuring the proper administration of this chapter and the coverages, services, and benefits provided for or authorized by this chapter.
(c) The board of trustees shall pay an independent administrator selected under this section. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.057. COMPENSATION OF PERSON EMPLOYED BY BOARD OF TRUSTEES. The board of trustees shall pay the compensation and expenses of a person employed by the board at the rate or in the amount approved by the board. The rate or amount may not exceed the rate or amount paid for similar services. (V.T.I.C. Art. 3.50-2, Sec. 4 (part).)
Sec. 1551.058. ELECTRONIC AUTHORIZATIONS. (a) The board of trustees may develop a system for a participant to electronically authorize:
(1) enrollment in a coverage or benefit;
(2) contributions to a coverage or benefit; and
(3) deductions or reductions to the participant's compensation or annuity for participation in a coverage or benefit.
(b) Notwithstanding any other law, the board of trustees may permit or require an authorization covered by Subsection (a) to be made electronically. (V.T.I.C. Art. 3.50-2, Sec. 4C.)
Sec. 1551.059. CERTIFICATE OF COVERAGE. The board of trustees shall provide for issuance to each employee or annuitant participating in the group benefits program a certificate of coverage that states:
(1) the benefits to which the participant is entitled;
(2) to whom the benefits are payable;
(3) to whom a claim must be submitted; and
(4) the provisions of the plan document, in summary form, that principally affect the participant. (V.T.I.C. Art. 3.50-2, Sec. 6(a).)
Sec. 1551.060. IDENTIFICATION CARDS. (a) The board of trustees may issue a single identification card to a participant in a health benefit plan and separately administered coverage under this chapter that offers pharmacy benefits.
(b) The card may contain information regarding both health and pharmacy benefits. (V.T.I.C. Art. 3.50-2, Sec. 6(b).)
Sec. 1551.061. ANNUAL REPORT. The board of trustees shall submit a written report not later than January 1 of each year to the governor, lieutenant governor, speaker of the house of representatives, and Legislative Budget Board concerning the coverages provided and the benefits and services being received by all participants under this chapter. The report must include information about the effectiveness and efficiency of:
(1) managed care cost containment practices; and
(2) fraud detection and prevention procedures. (V.T.I.C. Art. 3.50-2, Sec. 7.)
Sec. 1551.062. INFORMATION ON OPERATION AND ADMINISTRATION OF CHAPTER. (a) The board of trustees shall:
(1) conduct a continuing study of the operation and administration of this chapter, including:
(A) conducting surveys and preparing reports on group coverages and benefits available to participants; and
(B) studying experience relating to group coverages and benefits available to participants; and
(2) maintain statistics on the number, type, and disposition of fraudulent claims for benefits under this chapter.
(b) A contract entered into under this chapter must require a carrier to:
(1) furnish any reasonable report the board of trustees determines is necessary to enable the board to perform its functions under this chapter; and
(2) permit the board and a representative of the state auditor to examine records of the carrier as necessary to accomplish the purposes of this chapter.
(c) Each state agency shall keep records, make certifications, and furnish the board of trustees with information and reports necessary to enable the board to perform its functions under this chapter. (V.T.I.C. Art. 3.50-2, Sec. 17.)
Sec. 1551.063. CONFIDENTIALITY OF CERTAIN RECORDS. (a) The records of a participant in the group benefits program in the custody of the board of trustees, or of an administrator or carrier acting on behalf of the board, are confidential and not subject to disclosure and are exempt from the public access provisions of Chapter 552, Government Code, except as provided by this section.
(b) The records may be released to a participant or to an authorized attorney, family member, or representative acting on behalf of the participant.
(c) The board of trustees may release the records to:
(1) an administrator, carrier, agent, or attorney acting on behalf of the board;
(2) another governmental entity;
(3) a medical provider of the participant to accomplish the purposes of this chapter; or
(4) a party in response to a subpoena issued under applicable law.
(d) The records of a participant remain confidential after release to a person as authorized by this section.
(e) The records of a participant may become part of the public record of an administrative or judicial proceeding related to a contested case under this chapter unless the records are closed to public access by a protective order issued under applicable law. (V.T.I.C. Art. 3.50-2, Sec. 10(c).)
Sec. 1551.064. GROUP ACCIDENT AND HEALTH INSURANCE CONTRACTS. (a) A group accident and health insurance contract executed under this chapter must provide that:
(1) premium payments must be:
(A) paid directly to the Employees Retirement System of Texas; and
(B) postmarked or received not later than the 10th day of the month for which the premium is due;
(2) the premium for group continuation coverage under Section 3B, Article 3.51-6 may not exceed the level established for other surviving dependents of deceased employees and annuitants;
(3) at the time the insurance policy or contract is delivered, issued for delivery, renewed, amended, or extended, the Employees Retirement System of Texas shall give notice of the continuation option to each state agency covered by the group benefits program; and
(4) each state agency shall give written notice of the continuation option to each employee and dependent of an employee who is covered by the group benefits program.
(b) A group accident and health insurance contract executed under this chapter must provide that, not later than the 15th day after the date of any severance of the family relationship that might activate the continuation option under Section 3B, Article 3.51-6, the group member shall give written notice of the severance to the employing state agency.
(c) On receipt of notice under Subsection (b) or on the death of an employee, the employing state agency shall give written notice of the continuation option to each affected dependent. The notice must state the amount of the premium to be charged and must be accompanied by any necessary enrollment forms.
(d) A covered dependent must exercise the continuation option not later than the 45th day after the date of:
(1) the severance of the family relationship; or
(2) the retirement or death of the group member.
(e) A covered dependent must provide written notice of the exercise of the continuation option to the employing state agency within the time prescribed by Subsection (d). Coverage under the insurance policy remains in effect during the period prescribed by Subsection (d) if the policy premiums are paid.
(f) Any period of previous coverage under the insurance policy must be used in full or partial satisfaction of any required probationary or waiting periods provided in the contract for dependent coverage. (V.T.I.C. Art. 3.51-6, Sec. 3B(m).)
[Sections 1551.065-1551.100 reserved for expansion]
SUBCHAPTER C. COVERAGE AND PARTICIPATION
Sec. 1551.101. PARTICIPATION ELIGIBILITY: STATE OFFICERS AND EMPLOYEES. (a) An elected or appointed officer or employee who performs service, other than as an independent contractor, for this state, including an institution of higher education, and who is described by this section is eligible to participate in the group benefits program as an employee.
(b) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual receives compensation for service performed for this state pursuant to a payroll certified by a state agency, other than an institution of higher education, or by an elected or appointed officer of this state, including a payment made from:
(1) an amount appropriated by the legislature from a state fund;
(2) a trust fund held by the comptroller; or
(3) money paid under the official budget of a state agency, other than money appropriated under a general appropriations act.
(c) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual is appointed, subject to confirmation by the senate, as a member of the governing body with administrative responsibility over a statutory state agency that has statewide jurisdiction and whose employees are covered by this chapter.
(d) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual is a member of the State Board of Education or the governing body of an institution of higher education.
(e) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual receives compensation for service performed for an institution of higher education pursuant to a payroll certified by an institution of higher education or by an elected or appointed officer of this state and either:
(1) is eligible to be a member of the Teacher Retirement System of Texas; or
(2) is employed at least 20 hours a week and is not permitted to be a member of the Teacher Retirement System of Texas because the individual is employed by an institution of higher education only in a position that as a condition of employment requires the individual to be enrolled as a student in the institution in graduate-level courses. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(5) (part); 3A(a) (part).)
Sec. 1551.102. PARTICIPATION ELIGIBILITY: ANNUITANTS. (a) An individual who has at least three years of service for which the individual was eligible to participate in the group benefits program under Section 1551.101 and who retires in a manner described by this section is eligible to participate as an annuitant in the group benefits program.
(b) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual:
(1) retires under the jurisdiction of the Employees Retirement System of Texas; and
(2) receives or is eligible to receive an annuity under Subtitle B, D, or E, Title 8, Government Code, or Chapter 803, Government Code, that is based on at least 10 years of service credit or eligibility under Section 814.002 or 814.102, Government Code.
(c) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual:
(1) retires under the jurisdiction of the Teacher Retirement System of Texas;
(2) receives or is eligible to receive an annuity under Subtitle C, Title 8, Government Code, or Chapter 803, Government Code, that is based on at least 10 years of service credit; and
(3) was employed, as the last state employment before retirement, including employment by a public junior college, by a state agency whose employees are authorized to participate in the group benefits program.
(d) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual:
(1) retires under the optional retirement program established by Chapter 830, Government Code; and
(2) receives or is eligible to receive an annuity under that program and the individual:
(A) would have been eligible to retire and receive a service retirement annuity from the Teacher Retirement System of Texas or the Employees Retirement System of Texas based on at least 10 years of service credit if the individual had not elected to participate in the optional retirement program; or
(B) is disabled as determined by the Employees Retirement System of Texas.
(e) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual retired under Subtitle C, Title 8, Government Code, before September 1, 1991, with at least five and less than 10 years of service credit.
(f) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual is a retired officer or employee of a retirement system described by Section 1551.111.
(g) An individual is eligible to participate in the group benefits program as provided by Subsection (a) if the individual retires under a federal or state statutory retirement program not described by another provision of this section, to which an institution of higher education has made employer contributions, and the individual has met service requirements, age requirements, and other applicable requirements comparable to the requirements for retirement under the Teacher Retirement System of Texas, based on at least 10 years of service credit. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(2), (5) (part); 3(c); 3A(a) (part).)
Sec. 1551.103. RIGHT TO COVERAGE. Subject to Section 1551.351, an individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 may not be denied any group coverage under this chapter. (V.T.I.C. Art. 3.50-2, Sec. 13(a).)
Sec. 1551.104. AUTOMATIC COVERAGE. (a) Each full-time employee is covered automatically by the basic coverage plan for employees and each annuitant is covered by the basic coverage plan for annuitants unless:
(1) participation is specifically waived; or
(2) the employee or annuitant is expelled from the program under Section 1551.351.
(b) This section does not apply to an employee described by Section 1551.101(e)(2). (V.T.I.C. Art. 3.50-2, Sec. 13(b) (part).)
Sec. 1551.105. DATE AUTOMATIC COVERAGE BEGINS. Automatic coverage under this subchapter begins on the date an employee or annuitant becomes eligible for coverage. (V.T.I.C. Art. 3.50-2, Sec. 13(b) (part).)
Sec. 1551.106. GROUP COVERAGE PLAN PURCHASED TO PROVIDE FOR AUTOMATIC COVERAGE. A group coverage plan purchased by the board of trustees must provide for the automatic coverage described by this subchapter. (V.T.I.C. Art. 3.50-2, Sec. 13(b) (part).)
Sec. 1551.107. CONTINGENT COVERAGE. (a) Each part-time employee or employee eligible to participate in the group benefits program under Section 1551.101(e)(2) may participate in the program on execution of an appropriate application for coverage unless the employee is:
(1) ineligible for the group benefits program under Section 1551.110; or
(2) expelled from the group benefits program under Section 1551.351.
(b) An institution of higher education shall, at the time of employment, notify each of the institution's employees eligible to participate in the group benefits program under Section 1551.101(e)(2) of the employee's eligibility to participate. (V.T.I.C. Art. 3.50-2, Sec. 13(c).)
Sec. 1551.108. CONTINUING ELIGIBILITY OF CERTAIN PERSONS WITH LEGISLATIVE SERVICE OR EMPLOYMENT. Subject to Section 1551.351, on application to the board of trustees and on arrangement for payment of contributions and postage:
(1) an individual who has at least eight years of service credit in the Employees Retirement System of Texas for service as a member of the legislature, on ending the individual's service in the legislature, remains eligible for participation in the group benefits program; and
(2) an individual who has at least 10 years of service credit in the Employees Retirement System of Texas as an employee of the legislature, on ending the individual's service for the legislature, remains eligible for participation in the group benefits program. (V.T.I.C. Art. 3.50-2, Sec. 13(d).)
Sec. 1551.109. CONTINUING ELIGIBILITY OF CERTAIN MEMBERS OF BOARDS, COMMISSIONS, AND INSTITUTIONS OF HIGHER EDUCATION. (a) Subject to Section 1551.351, on application to the board of trustees and arrangement for payment of contributions, a former member of a governing body described by Section 1551.101(c) or a former member of the governing body of an institution of higher education remains eligible for participation in a health benefit plan offered under this chapter if a lapse in coverage after the end of the former member's term has not occurred.
(b) A participant described by this section may not receive a state contribution for premiums. The governing body of an institution of higher education may pay from local funds part or all of the contributions the state would pay for similar coverage of other participants in the group benefits program.
(c) The participant's contribution for coverage under a health benefit plan may not be greater than the contribution for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L. No. 99-272). (V.T.I.C. Art. 3.50-2, Sec. 13(e).)
Sec. 1551.110. INELIGIBILITY OF CERTAIN JUNIOR COLLEGE EMPLOYEES. (a) Except as provided by Subsections (c) and (d), an employee of a public junior college who is employed to perform services outside this state is not eligible to participate in the group benefits program unless the college elects, under procedures adopted by the board of trustees, to permit the employee to participate in the group benefits program.
(b) For purposes of this section, an employee is employed to perform services outside this state if 75 percent or more of the services performed by the employee are performed outside this state.
(c) This section does not apply to an individual employed by a public junior college on August 31, 1999. That individual remains eligible to participate in the group benefits program in the same manner as other employees of the college even if the individual's employment by the college is not continuous.
(d) An employee of a public junior college who is employed to perform services outside this state and who is employed after June 18, 1999, is eligible to participate in a group coverage provided under this chapter if the coverage is provided under an insurance policy, contract, or other agreement that:
(1) is in effect on June 18, 1999; and
(2) requires that the employee be eligible to participate in the coverage provided under the agreement.
(e) Eligibility to participate in a coverage under Subsection (d) ends on the date the insurance policy, contract, or other agreement is terminated or renewed. (V.T.I.C. Art. 3.50-2, Sec. 13C; Acts 76th Leg., R.S., Ch. 662, Sec. 3.)
Sec. 1551.111. PARTICIPATION BY CERTAIN RETIREMENT SYSTEMS. (a) The Texas Municipal Retirement System and the Texas County and District Retirement System shall participate in the group benefits program in the manner described by this section.
(b) Participation is limited to:
(1) an officer or employee of either system;
(2) an eligible dependent of an officer or employee of either system;
(3) an individual who:
(A) was an officer or employee of either system;
(B) has retired from either system;
(C) receives or is eligible to receive an annuity from either system or under Chapter 803, Government Code, based on at least 10 years of service credit; and
(D) has at least three years of service with a state agency whose employees are authorized to participate in the group benefits program; and
(4) an eligible dependent of a retired officer or employee described by Subdivision (3).
(c) Participation in the group benefits program does not extend to:
(1) the governing body of either system;
(2) a municipality or subdivision participating in either system; or
(3) a trustee, officer, or employee, or a dependent of a trustee, officer, or employee, of a participating municipality or subdivision.
(d) A participant described by this section may not receive a state contribution for premiums. (V.T.I.C. Art. 3.50-2, Sec. 3A(a) (part).)
Sec. 1551.112. PARTICIPATION BY TEXAS TURNPIKE AUTHORITY. (a) An individual may participate in the group benefits program as an annuitant and may obtain coverage for the individual's dependents as any other participating annuitant if the individual:
(1) began employment with, or became an officer of, the Texas Turnpike Authority within the three-year period preceding August 31, 1997;
(2) was an officer or employee of the Texas Turnpike Authority on August 31, 1997;
(3) became an officer or employee of the North Texas Tollway Authority on September 1, 1997; and
(4) retires or is eligible to retire with at least 10 years of service credit under the proportionate retirement program established by Chapter 803, Government Code, or under a public retirement system to which Chapter 803 applies.
(b) The North Texas Tollway Authority is responsible for payment of the contributions the state would make if the annuitant were a state employee. (V.T.I.C. Art. 3.50-2, Sec. 3A(b).)
Sec. 1551.113. PARTICIPATION BY CERTAIN EMPLOYEES WHOSE POSITIONS ARE PRIVATIZED OR ELIMINATED. (a) An individual described by Subsection (b) is entitled to receive state contributions required to provide health benefit plan coverage under the group benefits program for two months after the effective date of the individual's separation from state service.
(b) This section applies only to an individual who separates from state service and receives a cash payment under an incentive program implemented by the Texas Department of Human Services or the Texas Department of Health for certain employees whose positions are eliminated as a result of privatization or other reductions in services provided by those agencies. (V.T.I.C. Art. 3.50-2, Sec. 3B.)
[Sections 1551.114-1551.150 reserved for expansion]
SUBCHAPTER D. COVERAGE FOR DEPENDENTS
Sec. 1551.151. ENTITLEMENT TO COVERAGE. An individual who is eligible to participate in the group benefits program under Section 1551.101 or 1551.102 is entitled to secure for a dependent of the individual any group coverages provided under this chapter, as determined by the board of trustees and subject to the exceptions provided by this subchapter. (V.T.I.C. Art. 3.50-2, Sec. 19(a) (part).)
Sec. 1551.152. ELIGIBILITY OF FOSTER CHILD. A foster child is eligible for health benefit plan coverage only if the child is not covered by another governmental health program. (V.T.I.C. Art. 3.50-2, Sec. 19(a) (part).)
Sec. 1551.153. PARTICIPANT RESIDING OUTSIDE OF SERVICE AREA. An individual who is eligible to participate in the group benefits program under Section 1551.101 or 1551.102 and who resides outside of a health maintenance organization service area is entitled to group coverages for a dependent of the individual without evidence of insurability if the individual applies for the coverage for the dependent during the annual enrollment period. (V.T.I.C. Art. 3.50-2, Sec. 19(a) (part).)
Sec. 1551.154. EMPLOYEE PAYMENTS. In the manner and form the board of trustees determines, payments required of an employee in excess of employer contributions shall be made by:
(1) a deduction from the employee's monthly pay or retirement benefits; or
(2) a reduction of the employee's salary. (V.T.I.C. Art. 3.50-2, Sec. 19(a) (part).)
Sec. 1551.155. COVERAGE OPTIONS FOR SURVIVING SPOUSE. (a) A surviving spouse of an individual who is eligible to participate in the group benefits program under Section 1551.101 or 1551.102 and who is entitled to monthly benefits paid by a retirement system named in this chapter may, following the death of the individual, elect to retain:
(1) the spouse's authorized coverages; and
(2) authorized coverages for any dependent of the spouse.
(b) The coverage is at the group rate for other participants if:
(1) the coverage was previously secured by the deceased participant for the surviving spouse or dependent; and
(2) the surviving spouse directs the applicable retirement system to deduct required contributions from the monthly benefits paid to the spouse by the retirement system. (V.T.I.C. Art. 3.50-2, Sec. 19(b) (part).)
Sec. 1551.156. COVERAGE OPTIONS FOR DEPENDENT WHEN THERE IS NO SURVIVING SPOUSE. (a) A surviving dependent of an annuitant who was receiving monthly benefits paid by a retirement system named in this chapter may, following the death of the annuitant if there is not a surviving spouse, elect to retain any coverage previously secured by the annuitant until the dependent becomes ineligible for coverage for a reason other than the death of the member of the group.
(b) The coverage is at the group rate for other participants.
(c) A dependent who elects to retain coverage under this section and who is entitled to monthly benefits from a retirement system named in this chapter based on the service of the deceased annuitant must direct the retirement system to deduct required contributions for the coverage from the monthly benefits paid the surviving dependent by the retirement system. (V.T.I.C. Art. 3.50-2, Sec. 19(b) (part).)
Sec. 1551.157. COVERAGE OPTIONS AFTER EXPIRATION OF ANNUITY OPTION. The surviving spouse or dependent of an employee or annuitant may retain authorized coverages after expiration of a time-certain annuity option selected by the employee or annuitant. To retain the coverages, the surviving spouse or dependent must make advance payment of contributions to the Employees Retirement System of Texas under rules adopted by the board of trustees. (V.T.I.C. Art. 3.50-2, Sec. 19(c).)
Sec. 1551.158. REINSTATEMENT OF HEALTH BENEFIT PLAN COVERAGE BY CERTAIN DEPENDENTS. (a) A dependent child who is unmarried and whose coverage under this chapter ends when the child becomes 25 years of age may, on expiration of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L. No. 99-272), reinstate health benefit plan coverage under this chapter if the child, or the child's participating parent, pays the full cost of the health benefit plan coverage.
(b) A state contribution is not payable for coverage under this section.
(c) Coverage under this section terminates at the end of the month in which the child marries. (V.T.I.C. Art. 3.50-2, Sec. 19(d).)
Sec. 1551.159. COVERAGE FOR CERTAIN DEPENDENT CHILDREN OF EMPLOYEES. (a) Subject to any applicable limit in the General Appropriations Act, the board of trustees shall use money appropriated for employer contributions to fund 80 percent of the cost of basic coverage for a child who:
(1) is a dependent of an employee;
(2) would be eligible, if the child were not the dependent of the employee, for benefits under the program established by the state to implement Title XXI, Social Security Act (42 U.S.C. Section 1397aa et seq.), as amended; and
(3) is not eligible for the state Medicaid program.
(b) The board of trustees shall notify employees that:
(1) they may be eligible for dependent child coverage under Subsection (a); and
(2) an employee may apply for the coverage as provided by Subsection (c).
(c) To obtain dependent child coverage under Subsection (a), the employee must apply to the Texas Department of Human Services or other agency designated by the Health and Human Services Commission to perform eligibility screening under this section. The eligibility screening shall be coordinated with eligibility screening for the state Medicaid program. The agency that performs the eligibility screening shall certify to the board of trustees in writing whether a child is eligible for dependent child coverage under Subsection (a).
(d) If an employee does not obtain dependent child coverage under this section at the time the individual begins service to the state, the employee may apply for the coverage during the annual open enrollment period applicable to the employee's coverage under this chapter. The board of trustees may:
(1) continue the coverage until the next annual open enrollment period applicable to the employee's coverage, without regard to any change in status of the child; or
(2) adopt rules requiring an employee, during the period the coverage is in effect, to report a change in status that would make the dependent child ineligible for coverage and may terminate the coverage on receipt of the report of a change in status.
(e) The board of trustees may require an employee to reapply for dependent child coverage under this section during each annual open enrollment period applicable to the employee's coverage. The board of trustees and the Texas Department of Human Services or other agency designated by the Health and Human Services Commission to perform eligibility screening under this section shall cooperate to develop a cost-effective method for annual reevaluation of eligibility determinations for dependent child coverage under this section.
(f) The board of trustees may pay a higher percentage of the cost of basic coverage for a child described by Subsection (a) than the percentage required by Subsection (a) if money becomes available for that purpose.
(g) If the program established under Chapter 62, Health and Safety Code, using federal funding under Title XXI, Social Security Act (42 U.S.C. Section 1397aa et seq.), as amended, is terminated, state contributions for benefits for those eligible under Subsection (a) also terminates. (V.T.I.C. Art. 3.50-2, Sec. 14A.)
[Sections 1551.160-1551.200 reserved for expansion]
SUBCHAPTER E. GROUP COVERAGES
Sec. 1551.201. ESTABLISHMENT. (a) The board of trustees by rule shall establish group coverage plans for individuals eligible to participate in the group benefits program.
(b) The group coverage plans may, in the board of trustees' discretion, include:
(1) life coverage;
(2) accidental death and dismemberment coverage;
(3) health benefit coverage, including coverage for:
(A) hospital care and benefits;
(B) surgical care and treatment;
(C) medical care and treatment;
(D) dental care;
(E) obstetrical benefits;
(F) prescribed drugs, medicines, and prosthetic devices; and
(G) supplemental benefits, supplies, and services in accordance with this chapter;
(4) coverage providing protection against either long-term or short-term loss of salary; and
(5) any other group coverage that the board of trustees, in consultation with the group benefits advisory committee created under Subchapter J, considers advisable.
(c) The group coverage plans for annuitants may, at the discretion of the board of trustees, be separate or a part of the group coverage plans for employees. If the trustee establishes separate group coverage plans for annuitants, the separate group coverage plans must include both full benefits and supplemental coverage options. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(13) (part), 5(a) (part).)
Sec. 1551.202. AUTHORITY TO DEFINE BASIC COVERAGES. (a) The board of trustees may define the basic coverage applicable to each individual for whom coverage is automatic unless participation is specifically waived.
(b) The board of trustees may define different basic coverage plans for individuals eligible to participate in the uniform program under Section 1551.101 and for individuals eligible to participate in the group benefits program under Section 1551.102.
(c) Basic coverage must include basic health coverage. The coverage may be offered through any health benefit plan. (V.T.I.C. Art. 3.50-2, Sec. 5A(a).)
Sec. 1551.203. AUTHORITY TO DEFINE OPTIONAL COVERAGES. The board of trustees may define optional coverages for which the board may make available employer contributions under Section 1551.303. (V.T.I.C. Art. 3.50-2, Sec. 5A(b).)
Sec. 1551.204. AUTHORITY TO DEFINE VOLUNTARY COVERAGES. Subject to Section 1551.304, the board of trustees may define voluntary coverages. (V.T.I.C. Art. 3.50-2, Sec. 5A(c) (part).)
Sec. 1551.205. LIMITATIONS. The board of trustees may not contract for or provide a coverage plan that:
(1) excludes or limits coverage or services for acquired immune deficiency syndrome, as defined by the Centers for Disease Control and Prevention of the United States Public Health Service, or human immunodeficiency virus infection; or
(2) provides coverage for serious mental illness that is less extensive than the coverage provided for any physical illness. (V.T.I.C. Art. 3.50-2, Sec. 5(j).)
Sec. 1551.206. CAFETERIA PLAN. (a) The board of trustees may develop, implement, and administer a cafeteria plan if the board determines that establishment of the plan:
(1) is feasible;
(2) would be beneficial to the state and to employees who would be eligible to participate in the plan; and
(3) would not adversely affect the coverage plans provided under the group benefits program.
(b) The board of trustees may include in the cafeteria plan any benefit that may be included in a cafeteria plan under federal law.
(c) The board of trustees may enter into a contract or agreement with an independent and qualified agency, individual, or entity to:
(1) develop, implement, or administer a cafeteria plan; or
(2) assist in those activities.
(d) The board of trustees may adopt an order terminating the cafeteria plan and providing a procedure for the orderly withdrawal of the state and its employees from the plan if the board determines that a cafeteria plan established under this section is no longer advantageous to the state or its employees. (V.T.I.C. Art. 3.50-2, Secs. 4(k), 13B(a), (b), (c).)
Sec. 1551.207. PREMIUM CONVERSION BENEFIT PORTION OF CAFETERIA PLAN. Each employee must be enrolled in the premium conversion benefit portion of a cafeteria plan established under Section 1551.206. (V.T.I.C. Art. 3.50-2, Sec. 13B(d) (part).)
Sec. 1551.208. DETERMINATION TO SELF-FUND. (a) The board of trustees, in the board's sole discretion, shall determine those coverage plans that the board does not intend to purchase but intends to provide directly from the employees life, accident, and health insurance and benefits fund.
(b) The board of trustees, in the board's sole discretion and under conditions the board approves, may reinsure any coverage the board determines will be provided directly from the employees life, accident, and health insurance and benefits fund under Subsection (a). (V.T.I.C. Art. 3.50-2, Secs. 5(f) (part), 8.)
Sec. 1551.209. SELF-FUNDED COVERAGE EXEMPT FROM INSURANCE LAW. A coverage plan for which the board of trustees does not purchase coverage but provides under this chapter on a self-funded basis is exempt from any other insurance law that does not expressly apply to the plan or this chapter. (V.T.I.C. Art. 3.50-2, Sec. 5(f) (part).)
Sec. 1551.210. ACTUARIAL ADVICE FOR SELF-FUNDED COVERAGE. A qualified actuary selected by the board of trustees shall advise the board regarding an actuarially sound level of contributions required to provide coverage directly from the employees life, accident, and health insurance and benefits fund. (V.T.I.C. Art. 3.50-2, Sec. 5(f) (part).)
Sec. 1551.211. CONTINGENCY RESERVE FUND FOR SELF-FUNDED COVERAGE. (a) Before the first day of each state fiscal biennium, the board of trustees shall estimate for an average 60-day period during the biennium the expenditures from the employees life, accident, and health insurance and benefits fund anticipated for self-funded coverage plans, considering projected claims and administrative expenses for those plans.
(b) The board of trustees shall place the estimated amount in a contingency reserve fund to provide for adverse fluctuations in claims or administrative expenses.
(c) The board of trustees shall include in each request for legislative appropriations to the group benefits program the amount the board determines to be necessary to maintain the contingency reserve fund at the level required by this section.
(d) The board of trustees may invest and reinvest any portion of the contingency reserve fund under the standard of care provided by Section 815.307, Government Code, considering the functional need to provide for adverse fluctuations in claims or administrative expenses.
(e) The interest on, earnings of, and proceeds from the sale of investments of assets in the contingency reserve fund shall be credited to the fund. (V.T.I.C. Art. 3.50-2, Sec. 5(e).)
Sec. 1551.212. FIRMS TO ADMINISTER SELF-FUNDED COVERAGE. (a) For those coverage plans that the board of trustees funds from the employees life, accident, and health insurance and benefits fund, the board may contract with one or more qualified and experienced administering firms to administer the plans in the best interest of the participants in the group benefits program.
(b) The contract may be awarded only after a competitive bid process. The board of trustees is not required to select the lowest bid but shall take into consideration other relevant criteria, including ability to service large group programs and past experience.
(c) If the board of trustees selects a firm whose bid was not the lowest or whose bid differs from that specified, the board shall fully justify and explain the reasons for the action in the minutes of the next meeting of the board. (V.T.I.C. Art. 3.50-2, Secs. 5(h), (i).)
Sec. 1551.213. BIDS FOR PURCHASED COVERAGE. (a) For those coverage plans for which the board of trustees determines to purchase coverage, the board shall notify eligible carriers:
(1) that competitive bidding will be conducted; and
(2) of the date by which an eligible carrier must submit a bid on the contract to the board.
(b) The board of trustees shall submit the group coverages provided by the group benefits program for competitive bidding at least every six years. (V.T.I.C. Art. 3.50-2, Sec. 5(a) (part).)
Sec. 1551.214. SELECTION OF BIDS FOR PURCHASED COVERAGE. (a) An actuary selected by the board of trustees shall advise the board as to the actuarial soundness of the bids received under Section 1551.213.
(b) The board of trustees:
(1) shall select carriers to provide services that will be in the best interest of participants; and
(2) is not required to select the lowest bid but shall take into consideration other relevant criteria, including ability to service contracts, past experience, and financial ability.
(c) If the board of trustees selects a carrier whose bid differs from that advertised, the board shall record the deviation and shall fully justify and explain the reasons for the deviation in the minutes of the next meeting of the board.
(d) The board of trustees shall notify the carriers that submitted bids of the results of the bidding. (V.T.I.C. Art. 3.50-2, Sec. 5(a) (part).)
Sec. 1551.215. ACCOUNTING BY CARRIER PROVIDING PURCHASED COVERAGE. (a) A carrier providing a coverage purchased under this chapter shall provide an accounting to the board of trustees not later than the 90th day after the end of each plan year.
(b) The accounting must be in a form approved by the board of trustees.
(c) The accounting must state for the period from the coverage's date of issue to the end of the plan year:
(1) the amounts of contributions accrued under the coverage;
(2) the total of mortality and other claims, charges, losses, and expenses incurred; and
(3) the amounts of the carrier's allowance for a reasonable profit and contingencies. (V.T.I.C. Art. 3.50-2, Sec. 9(a).)
Sec. 1551.216. SPECIAL CONTINGENCY RESERVE. (a) A carrier issuing a group coverage plan under this chapter shall hold as a special contingency reserve an amount that equals the amount by which the amount described by Section 1551.215(c)(1) exceeds the sum of the amounts described by Sections 1551.215(c)(2) and (3).
(b) The carrier may use the special contingency reserve only for charges, claims, and expenses under the plan.
(c) The special contingency reserve earns interest at a rate determined before each plan year by the carrier and approved by the board of trustees as consistent with the rates generally used by the carrier for similar funds held under other group coverage plans.
(d) On a determination by the board of trustees that the special contingency reserve has attained an amount estimated by the board to make satisfactory provision for adverse fluctuations in future charges, claims, or expenses under the plan, any further excess shall be deposited to the credit of the employees life, accident, and health insurance and benefits fund.
(e) On discontinuation of a plan, any balance remaining in the special contingency reserve after all charges have been made shall be deposited to the credit of the employees life, accident, and health insurance and benefits fund. The carrier may make the deposit in equal monthly installments over a period of not more than two years. (V.T.I.C. Art. 3.50-2, Sec. 9(b).)
Sec. 1551.217. USE OF EMPLOYEE'S SALARY IN COMPUTATION OF PREMIUM OR COVERAGE. (a) If the board of trustees establishes a group coverage plan that protects against either long-term or short-term loss of salary, the board may use an employee's annual salary in computing the amount of the employee's premium or coverage, or both, under the plan.
(b) In this section, an employee's annual salary includes benefit replacement pay under Subchapter H, Chapter 659, Government Code, as added by Chapter 417, Acts of the 74th Legislature, Regular Session, 1995. (V.T.I.C. Art. 3.50-2, Sec. 5(k).)
[Sections 1551.218-1551.250 reserved for expansion]
SUBCHAPTER F. GROUP LIFE AND ACCIDENTAL DEATH AND
DISMEMBERMENT INSURANCE COVERAGE PLAN
Sec. 1551.251. GROUP LIFE INSURANCE COVERAGE PLAN. (a) The board of trustees shall administer a group life insurance coverage plan to provide each individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 group life coverages that provide payments and benefits in an amount and manner the board determines.
(b) The group life insurance coverage plan is subject to the conditions and limitations of:
(1) this chapter and rules adopted under this chapter; and
(2) the policy or policies purchased by the board of trustees.
(c) The board of trustees may include the dependents of individuals eligible to participate in the group benefits program under Section 1551.101 or 1551.102 in the group life insurance coverage plan. (V.T.I.C. Art. 3.50-2, Sec. 11(a).)
Sec. 1551.252. ADDITIONAL TERM LIFE INSURANCE. Notwithstanding any other provision of this code, the board of trustees may authorize:
(1) dependent term life insurance in an amount equal to the term life insurance provided under the basic coverage; and
(2) optional term life insurance in an amount equal to four times the employee's annual salary plus the amount of term life insurance provided under the basic coverage. (V.T.I.C. Art. 3.50-2, Sec. 11(b).)
Sec. 1551.253. DETERMINATION OF ANNUAL SALARY. (a) To implement this subchapter, the board of trustees shall:
(1) adopt rules for the conversion of other than annual rates of salary; and
(2) specify the types of pay included in annual salary and any other matter necessary to implement this subchapter.
(b) For the purpose of determining the amount of an employee's optional term life insurance coverage, an employee's annual salary includes benefit replacement pay under Subchapter H, Chapter 659, Government Code, as added by Chapter 417, Acts of the 74th Legislature, Regular Session, 1995. (V.T.I.C. Art. 3.50-2, Secs. 11(c), 11(d), as added Acts 75th Leg., R.S., Ch. 1035.)
Sec. 1551.254. ACCELERATED LIFE INSURANCE BENEFITS. (a) In addition to exercising the authority granted under Subchapter B, Chapter 1111, the board of trustees may adopt rules to provide for payment of accelerated life insurance benefits to a terminally ill, terminally injured, or permanently disabled participant, including an annuitant participating in optional term life insurance coverage, in amounts that benefit the participant without increasing the cost of providing the benefits.
(b) The amount of any payment of an accelerated benefit under a rule adopted under this section must be deducted from the amount that would otherwise be payable as a death benefit. (V.T.I.C. Art. 3.50-2, Sec. 11(d), as added Acts 75th Leg., R.S., Ch. 1048; Sec. 11(e)(3) (part).)
Sec. 1551.255. INCLUSION OF PROVISIONS FOR VIATICAL SETTLEMENTS. (a) In this section, "viatical settlement" has the meaning assigned by Section 1111.001.
(b) The board of trustees shall adopt rules that require a group life insurance coverage plan established under this chapter to allow a participant in the plan to make, in conjunction with receipt of a viatical settlement, an irrevocable designation of beneficiary for part or all of the group life coverage benefits.
(c) A viatical settlement is not valid for any coverage under the group benefits program unless the participant has a terminal illness or terminal injury, as defined by rules adopted by the board of trustees, at the time application for benefits is made. (V.T.I.C. Art. 3.50-2, Sec. 11A.)
Sec. 1551.256. OPTIONAL TERM LIFE INSURANCE COVERAGE AFTER RETIREMENT. (a) A participant in the optional group term life insurance coverage plan may maintain optional term life insurance coverage after retirement in addition to basic term life insurance coverage after retirement.
(b) The board of trustees may adopt rules to implement and administer Subsection (a).
(c) Under Subsection (a), the participant may maintain an amount of optional term life insurance coverage on the participant's life on the date of retirement, not to exceed two times the participant's annual salary on the last September 1 before retirement and subject to benefit reduction factors based on age as determined by the board of trustees.
(d) The board of trustees shall determine the premium rate for optional term life insurance coverage for annuitants under Subsection (a). The rate must be comparable to the premium rate for optional term life insurance coverage for employees of the same age.
(e) As an alternative to the optional term life insurance coverage plan, an annuitant may choose a minimum optional term life insurance coverage amount not subject to benefit reduction factors based on age, with a coverage amount and premium rate determined by the board of trustees. (V.T.I.C. Art. 3.50-2, Secs. 11(e)(1), (2).)
Sec. 1551.257. ELIGIBILITY OF ANNUITANT FOR EXTENDED INSURANCE BENEFITS. An annuitant participating in optional term life insurance coverage is not eligible for premium-waived extended insurance benefits if the total disability begins after the date of retirement. (V.T.I.C. Art. 3.50-2, Sec. 11(e)(3) (part).)
Sec. 1551.258. TERMINATION OF ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE COVERAGE ON RETIREMENT. Without regard to the employee's age, accidental death and dismemberment insurance coverage ends on the employee's date of retirement. (V.T.I.C. Art. 3.50-2, Sec. 11(e)(3) (part).)
Sec. 1551.259. ORDER OF PRECEDENCE OF PAYMENT TO SURVIVORS. (a) The amount of group life coverage and group accidental death and dismemberment coverage in force for a participant on the date the participant dies shall be paid, on the establishment of a valid claim, to a person surviving the death in the following order of precedence:
(1) to the beneficiary designated by the participant in a signed and witnessed writing received before death by the employing state agency;
(2) if a beneficiary is not designated, to the spouse of the participant;
(3) if Subdivisions (1) and (2) do not apply, to the children of the participant and descendants of the deceased children by representation;
(4) if Subdivisions (1)-(3) do not apply, to the parents of the participant or the survivor of the parents;
(5) if Subdivisions (1)-(4) do not apply, to the executor or administrator of the estate of the participant; or
(6) if Subdivisions (1)-(5) do not apply, to other relatives of the participant entitled under applicable laws of the participant's domicile on the date of the participant's death.
(b) If before the first anniversary of the date of death of the participant a claim for payment has not been filed by a person entitled under the order of precedence in Subsection (a), or if payment to the person within that period is prohibited by any statute or rule, payment may be made in the order of precedence as if the person had predeceased the participant.
(c) If before the second anniversary of the date of death of the participant a claim for payment has not been filed by a person entitled under the order of precedence in Subsection (a), and neither the board of trustees nor the office established by the administering carrier has received notice that the claim will be made, payment may be to a claimant equitably entitled to the payment as determined by the board.
(d) If before the fourth anniversary of the date of death of the participant payment has not been made under this section and a claim for payment by a person entitled under this section is not pending, the amount payable escheats to the credit of the employees life, accident, and health insurance and benefits fund.
(e) The board of trustees shall give effect to a full or partial disclaimer of benefits executed in accordance with Section 37A, Texas Probate Code.
(f) Payment under Subsection (b) or (c) bars recovery by any other person.
(g) For purposes of Subsection (a)(1), a designation, change, or cancellation of a beneficiary in a document, including a will, that is not executed and filed in the manner described by that subsection is not valid. (V.T.I.C. Art. 3.50-2, Sec. 12.)
[Sections 1551.260-1551.300 reserved for expansion]
SUBCHAPTER G. CONTRIBUTIONS AND COSTS
Sec. 1551.301. FUNDING OF BASIC COVERAGE. The board of trustees shall use the amount appropriated for employer contributions in the manner provided by this subchapter to fund the basic coverage. (V.T.I.C. Art. 3.50-2, Sec. 14(a) (part).)
Sec. 1551.302. ALLOCATION OF EMPLOYER CONTRIBUTIONS. (a) The board of trustees may equitably allocate to each health benefit plan the employer contributions that would be required to fund basic health coverage for participants in the plans to the extent funds are available.
(b) In allocating the employer contributions among plans, the board of trustees shall consider the relevant risk characteristics of each plan's enrollment, including:
(1) demographic variations in the use and cost of health care; and
(2) prevailing cost patterns in the area in which the plan operates.
(c) The allocation must be reasonable and set in a manner that ensures participants a fair choice among health benefit plans providing a basic plan.
(d) The contribution set for each participant must be within the total amount appropriated in the General Appropriations Act. (V.T.I.C. Art. 3.50-2, Sec. 14(a) (part).)
Sec. 1551.303. FUNDING OF OPTIONAL COVERAGES. The board of trustees may allocate any employer contributions remaining after the basic coverage has been funded to fund optional coverages in any manner the board determines is appropriate. (V.T.I.C. Art. 3.50-2, Sec. 14(b).)
Sec. 1551.304. FUNDING OF VOLUNTARY COVERAGES. The board of trustees may not allocate any employer contributions to fund voluntary coverages. Voluntary coverages may be funded only by participant contributions. (V.T.I.C. Art. 3.50-2, Secs. 5A(c) (part), 14(c).)
Sec. 1551.305. COST OF BASIC COVERAGE EXCEEDING EMPLOYER CONTRIBUTIONS. If the cost of the basic coverage for an individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 exceeds the amount of employer contributions allocated to fund the basic coverage, the state shall deduct from or reduce the monthly compensation of the participant or deduct from the retirement benefits of the participant, as applicable, an amount sufficient to pay the cost of the basic coverage. (V.T.I.C. Art. 3.50-2, Sec. 14(d).)
Sec. 1551.306. PAYMENT OF EXCESS COST OVER BASIC COVERAGE CONTRIBUTION. (a) The board of trustees shall apply the amount of any employer contribution for optional coverages to the excess of the cost of the basic and optional coverages for which an individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 applies over the basic coverage contribution.
(b) Except as provided by Section 1551.309, if a participant applies for basic and optional coverages for which the cost exceeds the employer contributions for those coverages under this chapter, the participant shall authorize in a form and manner satisfactory to the board of trustees a deduction from the participant's monthly compensation or monthly annuity equal to the difference between:
(1) the cost of basic and optional coverages for which the participant applies; and
(2) the employer contributions for basic and optional coverages. (V.T.I.C. Art. 3.50-2, Sec. 14(e).)
Sec. 1551.307. PAYMENT FOR VOLUNTARY COVERAGES. Except as provided by Section 1551.309, if an individual eligible to participate in the group benefits program under Section 1551.101 or 1551.102 applies for voluntary coverages, the participant shall authorize in a form and manner satisfactory to the board of trustees a deduction from the participant's monthly compensation or monthly annuity equal to the cost of the voluntary coverages. (V.T.I.C. Art. 3.50-2, Sec. 14(f).)
Sec. 1551.308. NO CONTRIBUTION ON REFUSAL OF COVERAGE. The state and a state agency may not make any contribution to the cost of any coverages or benefits provided under this chapter for an individual who refuses the coverages or benefits in a form and manner satisfactory to the board of trustees. (V.T.I.C. Art. 3.50-2, Sec. 14(g).)
Sec. 1551.309. EMPLOYEE PAYMENTS FOR PARTICIPATION IN CAFETERIA PLAN. (a) If an employee elects to participate in the cafeteria plan, the employee must execute a salary reduction agreement under which the employee's monthly compensation will be reduced in an amount equal to the difference between:
(1) the employer contributions for basic and optional coverages; and
(2) the cost of the cafeteria plan coverages the board of trustees identifies as comparable to the basic and optional coverages for which the employee is eligible.
(b) The salary reduction agreement must also provide for an additional reduction in the employee's compensation equal to the cost of voluntary coverages for which the employee has applied.
(c) An employee who executes a salary reduction agreement for a group coverage plan included in the cafeteria plan elects to participate in the cafeteria plan and agrees to a salary reduction for the coverages for subsequent plan years unless the employee, during an annual enrollment period specified by the board of trustees, elects in a form and manner satisfactory to the board not to participate for the next plan year in the coverages.
(d) An employee who elects not to participate in the cafeteria plan group coverage plans may reenroll by executing a new salary reduction agreement during a subsequent annual enrollment period.
(e) A salary reduction agreement for cafeteria plan benefits, other than a group coverage plan, must be executed annually during the annual enrollment period.
(f) The employee shall pay any remaining portion of the cost of benefits that is not covered by the contributions for basic and optional coverages and the salary reduction under the cafeteria plan by executing a payroll deduction agreement. (V.T.I.C. Art. 3.50-2, Sec. 14(h).)
Sec. 1551.310. STATE CONTRIBUTION REQUIRED. The state shall contribute to the cost of each participant's group coverages, including dependents' group coverages, the amounts appropriated for the coverages in the General Appropriations Act. (V.T.I.C. Art. 3.50-2, Sec. 15(b) (part).)
Sec. 1551.311. AMOUNT OF STATE CONTRIBUTION. (a) Not later than November 1 preceding each regular session of the legislature, the board of trustees shall certify to the Legislative Budget Board and the budget division of the governor's office for information and review the amount necessary to pay the contributions of the state to the board for the coverages provided under this chapter during the following biennium.
(b) The governor shall include the amount in the budget that the governor submits to the legislature. (V.T.I.C. Art. 3.50-2, Sec. 15(a) (part).)
Sec. 1551.312. AMOUNT OF STATE CONTRIBUTION FOR CERTAIN DEPENDENT CHILDREN. The state may contribute a greater amount for coverage for dependent children described by Section 1551.159(a) than the amount the state contributes for group coverages for other dependent children. (V.T.I.C. Art. 3.50-2, Sec. 15(b) (part).)
Sec. 1551.313. AMOUNT OF STATE CONTRIBUTION FOR CERTAIN SURVIVING DEPENDENTS. If funds are specifically appropriated for the purpose, this state shall pay the same portion of the cost of the required contributions for a deceased annuitant's surviving spouse or other surviving dependent who elects to retain coverage under Section 1551.156 as this state pays for similar dependent coverage for an employee or annuitant participating in the program. (V.T.I.C. Art. 3.50-2, Sec. 19(b) (part).)
Sec. 1551.314. CERTAIN STATE CONTRIBUTIONS PROHIBITED. A state contribution may not be made for coverages under this chapter selected by an individual who receives a state contribution, other than as a spouse, dependent, or beneficiary, for coverages under a group benefits program provided by an institution of higher education, as defined by Section 61.003, Education Code. (V.T.I.C. Art. 3.50-2, Sec. 15(a) (part).)
Sec. 1551.315. REQUIRED CONTRIBUTIONS BY STATE AGENCIES. (a) The governing board of each state agency participating in the group benefits program shall pay to the board of trustees an amount equal to the amount appropriated by the legislature for each employee's individual group coverages or dependents' group coverages for the agency's employees who are, and annuitants who were, compensated from funds not appropriated in the General Appropriations Act.
(b) The state agency shall:
(1) include the required contributions from funds not appropriated in the General Appropriations Act in its annual operating budget;
(2) ensure current participant coverages based on the records of the board of trustees;
(3) make timely payments of amounts due the board of trustees from all fund sources under the state agency's control; and
(4) each month reconcile board of trustees and state agency records of coverages and payments. (V.T.I.C. Art. 3.50-2, Sec. 15(b) (part).)
Sec. 1551.316. ALLOCATION TO BOARD OF TRUSTEES OF EMPLOYER CONTRIBUTIONS. From the several funds from which employees receive their respective salaries, all employer contributions computed in accordance with this chapter and rules adopted under this chapter are allocated to the board of trustees as provided by this chapter. (V.T.I.C. Art. 3.50-2, Sec. 15(b) (part).)
Sec. 1551.317. PAYMENT OF EMPLOYER CONTRIBUTIONS ALLOCATED BY THE STATE. (a) All money allocated by this state, including by institutions of higher education, to the board of trustees under this chapter shall be paid to the board in monthly installments based on the annual estimate by the board of the contributions to be received for all employees during the year.
(b) At the end of each fiscal year, the board of trustees shall make any adjustments required to cover the difference between:
(1) the annual estimate; and
(2) the actual amount of the employer contributions during the year.
(c) Each monthly installment shall be paid to the appropriate fund created by this chapter in the amount certified by the board of trustees. (V.T.I.C. Art. 3.50-2, Sec. 15(c).)
Sec. 1551.318. PAYMENT OF EMPLOYER CONTRIBUTIONS NOT ALLOCATED BY THE STATE. (a) The board of trustees shall certify to the governing board of each state agency participating in the group benefits program that provides contributions for its employees' group coverages and dependents' group coverages from operating budgets provided from sources other than the General Appropriations Act the proportionate amounts required to pay its contributions.
(b) The board of trustees shall make the certification not later than the 30th day before the date of the meeting at which the governing board of the state agency adopts its operating budget. (V.T.I.C. Art. 3.50-2, Sec. 15(d).)
Sec. 1551.319. AMOUNT OF CONTRIBUTION FOR FULL-TIME AND PART-TIME EMPLOYEES. (a) A full-time employee receives the benefits of a full state contribution for coverage under this chapter.
(b) A part-time employee receives the benefits of one-half of the amount of the state contribution received by a full-time employee. (V.T.I.C. Art. 3.50-2, Secs. 3(a)(14) (part), (15) (part).)
Sec. 1551.320. CERTAIN COSTS. The Texas Higher Education Coordinating Board shall pay all costs incurred in determining whether an individual is disabled if:
(1) the individual is an annuitant under the optional retirement program established by Chapter 830, Government Code; and
(2) the individual's last state employment was as an officer or employee of the coordinating board. (V.T.I.C. Art. 3.50-2, Sec. 4A (part).)
[Sections 1551.321-1551.350 reserved for expansion]
SUBCHAPTER H. EXPULSION AND ADJUDICATION OF CLAIMS
Sec. 1551.351. EXPULSION. (a) After notice and hearing as provided by this section, the board of trustees may expel from participation in the group benefits program a participant who:
(1) submits a fraudulent claim or application for coverage under the program; or
(2) defrauds or attempts to defraud a group coverage plan offered under the group benefits program.
(b) On receipt of a complaint or on its own motion, the board of trustees may call and hold a hearing to determine whether a participant acted in a manner described by Subsection (a).
(c) A proceeding under this section is a contested case under Chapter 2001, Government Code.
(d) At the conclusion of the hearing, if the board of trustees determines that the participant acted in a manner described by Subsection (a), the board shall expel the participant from participation in the group benefits program.
(e) A participant expelled from the group benefits program may not participate in a coverage plan offered by the program for a period determined by the board of trustees, not to exceed five years, beginning on the date the expulsion takes effect.
(f) An appeal of a determination by the board of trustees under this section is under the substantial evidence rule. (V.T.I.C. Art. 3.50-2, Sec. 13A.)
Sec. 1551.352. EXECUTIVE DIRECTOR DETERMINES QUESTIONS RELATING TO ENROLLMENT OR PAYMENT OF CLAIMS. The executive director has exclusive authority to determine all questions relating to enrollment in or payment of a claim arising from group coverages or benefits provided under this chapter other than questions relating to payment of a claim by a health maintenance organization. (V.T.I.C. Art. 3.50-2, Sec. 4B(a).)
Sec. 1551.353. RESCISSION OF COVERAGE OR DENIAL OF CLAIM BY EXECUTIVE DIRECTOR. (a) The executive director may rescind coverage, deny a claim arising from the coverage, or both, if the executive director determines that a participant has:
(1) obtained the coverage under any group coverage plan provided under this chapter through the use of a material misrepresentation or fraud; or
(2) fraudulently induced the extension of the coverage by making a material misrepresentation or supplying false information on an application for coverage or related documentation or in a communication.
(b) The executive director may rescind the coverage to the date of:
(1) the inception of the coverage; or
(2) the fraudulent act or material misrepresentation.
(c) The authority of the executive director to act under this section is in addition to and independent of any expulsion action under Section 1551.351. (V.T.I.C. Art. 3.50-2, Sec. 4B(a-1) (part).)
Sec. 1551.354. DOUBLE OR MULTIPLE LIABILITY. (a) The executive director may determine that a claim arising under any group coverage plan administered by the board of trustees may expose the plan to double or multiple liability.
(b) The executive director may cause the filing of a suit concerning the claim in a district court in Travis County on behalf of the Employees Retirement System of Texas to protect the group coverage plan from double or multiple liability. (V.T.I.C. Art. 3.50-2, Sec. 4B(b).)
Sec. 1551.355. APPEAL OF EXECUTIVE DIRECTOR'S DETERMINATION. (a) Subject to Subsection (b), an appeal of a determination of the executive director under this subchapter is only to the board of trustees.
(b) On behalf of the board of trustees, the executive director may:
(1) refer an appeal to the State Office of Administrative Hearings for a hearing; or
(2) notwithstanding any other law, including Section 2003.021, Government Code, employ or contract for the services of an administrative law judge or other hearing examiner not affiliated with the State Office of Administrative Hearings to conduct the hearing of an appeal.
(c) The appeal is a contested case under Chapter 2001, Government Code. (V.T.I.C. Art. 3.50-2, Secs. 4B(a-1) (part), (c) (part), (c-3).)
Sec. 1551.356. STANDING. A person has standing to appeal a determination of the executive director under this subchapter only if the person is:
(1) an individual participating in the group benefits program; or
(2) after the death of a participant, the participant's estate, personal representative, heir at law, or designated beneficiary. (V.T.I.C. Art. 3.50-2, Sec. 4B(c) (part).)
Sec. 1551.357. DETERMINATION OF APPEAL BY BOARD OF TRUSTEES. (a) In a proceeding considered to be a contested case under Chapter 2001, Government Code, the board of trustees may modify or delete a proposed finding of fact or conclusion of law contained in a proposal for decision submitted by an administrative law judge or other hearing examiner, or make alternative findings of fact and conclusions of law.
(b) The board of trustees shall state in writing the specific reason for the board's determination.
(c) The board of trustees may adopt rules to implement this section. (V.T.I.C. Art. 3.50-2, Sec. 4B(c-1).)
Sec. 1551.358. NEGOTIATION. (a) Notwithstanding any other provision of this subchapter, the board of trustees and a person who has standing to pursue an administrative appeal under this subchapter may at any time informally negotiate an award of benefits.
(b) Negotiated benefits may not exceed the maximum benefits otherwise available or required by law. (V.T.I.C. Art. 3.50-2, Sec. 4B(c-2).)
Sec. 1551.359. STANDARD OF REVIEW OF DETERMINATION OF BOARD OF TRUSTEES. The standard of review for the appeal of a determination made by the board of trustees under this subchapter is by substantial evidence. (V.T.I.C. Art. 3.50-2, Sec. 4B(d).)
Sec. 1551.360. DELEGATION. (a) The board of trustees may delegate its duty to hear an appeal to the executive director.
(b) The executive director may delegate the director's duty under this subchapter to another employee of the Employees Retirement System of Texas. (V.T.I.C. Art. 3.50-2, Secs. 4B(e), (f).)
[Sections 1551.361-1551.400 reserved for expansion]
SUBCHAPTER I. FUNDS
Sec. 1551.401. EMPLOYEES LIFE, ACCIDENT, AND HEALTH INSURANCE AND BENEFITS FUND. (a) The employees life, accident, and health insurance and benefits fund is in the state treasury.
(b) The board of trustees shall administer the fund.
(c) Contributions of participants and the state provided for under this chapter shall be credited to the fund.
(d) The fund is available:
(1) without fiscal year limitation for all payments for any coverages provided for under this chapter; and
(2) for payment of expenses of administering this chapter within the limitations that may be specified annually by the legislature.
(e) The board of trustees shall regularly set aside in the fund an amount equal to a percentage of the contributions made by participants and the state that the board determines is reasonably adequate to pay the expenses of administering this chapter.
(f) The board of trustees, from time to time and in amounts it considers appropriate, may transfer unused funds for administrative expenses to the contingency reserves to be used by the board only for charges, claims, and expenses under the group benefits program. (V.T.I.C. Art. 3.50-2, Secs. 16(a), (b).)
Sec. 1551.402. STATE EMPLOYEES CAFETERIA PLAN TRUST FUND. (a) The state employees cafeteria plan trust fund is in the state treasury.
(b) The board of trustees shall administer the fund.
(c) The following shall be credited to the fund:
(1) salary reduction payments for benefits included in a cafeteria plan other than group coverage plans under the group benefits program; and
(2) appropriations by the state for the administration of a cafeteria plan.
(d) The trust fund is available without fiscal year limitation:
(1) for all payments for any benefits included in a cafeteria plan other than group coverage plans under the group benefits program; and
(2) for payment of expenses of administering a cafeteria plan.
(e) The board of trustees may establish accounts for money in the fund as the board considers necessary, including accounts for the administration of a cafeteria plan. The board of trustees may transfer assets from one account to another:
(1) to pay benefits if:
(A) the transfer is necessary for financial management purposes; and
(B) adequate arrangements are made to reimburse the account from which the transfer was made; and
(2) to pay administrative expenses. (V.T.I.C. Art. 3.50-2, Secs. 16B(a), (c).)
Sec. 1551.403. FEES FOR STATE EMPLOYEES CAFETERIA PLAN TRUST FUND. (a) Subject to Subsection (e), the board of trustees may establish a monthly fee to be paid by each employee who elects to participate in a cafeteria plan for the purpose of paying the expenses of administering the cafeteria plan.
(b) The board of trustees shall establish the amount of the monthly fee and may establish a separate fee for each benefit included in a cafeteria plan.
(c) If the board of trustees establishes a monthly fee, each employee who participates in the cafeteria plan must authorize payment of the fee by executing a separate payroll deduction agreement or as part of the salary reduction agreement, as determined by the board.
(d) The monthly fee shall be paid into the state employees cafeteria plan trust fund.
(e) The board of trustees may not establish a fee for administering the premium conversion benefit portion of a cafeteria plan. (V.T.I.C. Art. 3.50-2, Secs. 13B(d) (part), 16B(b).)
Sec. 1551.404. INSUFFICIENT EARNINGS FOR EMPLOYEE TO PARTICIPATE IN CAFETERIA FUND. (a) If the earnings of an employee who elects to participate in a cafeteria plan are insufficient to pay the cost of the coverages and benefits selected by the employee, the employee is liable to the board of trustees for an amount equal to the difference between:
(1) the amount received by the board; and
(2) the cost of the coverages and benefits.
(b) If the employee does not pay the difference within the time specified by the board of trustees, the board may:
(1) cancel the coverages and benefits retroactive to the last month for which full payment was made; or
(2) pursue any other available legal remedy. (V.T.I.C. Art. 3.50-2, Sec. 16B(d).)
Sec. 1551.405. EMPLOYEES' HEALTH CARE STABILIZATION TRUST FUND. (a) The employees' health care stabilization trust fund is a fund in the state treasury.
(b) The board of trustees shall administer the fund.
(c) The following shall be credited to the fund:
(1) money transferred to the fund at the direction of the legislature; and
(2) gifts and grants contributed to the fund.
(d) In administering the fund, the board of trustees shall make investments in a manner that preserves the purchasing power of the fund's assets.
(e) Money in the fund may not be spent for any purpose, except that the interest and investment returns of the fund may be appropriated only to stabilize the cost of state and participant contributions for health benefit coverage under this chapter by minimizing to the greatest extent possible increases in those contributions.
(f) The fund is exempt from the application of Section 403.095, Government Code. (V.T.I.C. Art. 3.50-2, Secs. 16C(a), (b) (part), (c) (part), (d), (e).)
Sec. 1551.406. INVESTMENT OF FUNDS. (a) Under the standard of care provided by Section 815.307, Government Code, the board of trustees may manage and has full power to invest the money in:
(1) the employees life, accident, and health insurance and benefits fund;
(2) the state employees cafeteria plan trust fund; and
(3) the employees' health care stabilization trust fund.
(b) The earnings, including interest on money in the fund and proceeds from the sale of any investments, become a part of the fund. (V.T.I.C. Art. 3.50-2, Secs. 16(c), 16B(e), 16C(b) (part), (c) (part).)
Sec. 1551.407. MANAGEMENT OF ASSETS. The board of trustees may commingle for investment purposes the assets of a fund created under this chapter with another fund created under this chapter or any other trust fund administered by the board if the board maintains and credits proportionate ownership records. (V.T.I.C. Art. 3.50-2, Sec. 16A.)
[Sections 1551.408-1551.450 reserved for expansion]
SUBCHAPTER J. GROUP BENEFITS ADVISORY COMMITTEE
Sec. 1551.451. DEFINITION. In this subchapter, "committee" means the group benefits advisory committee. (New.)
Sec. 1551.452. NUMBER OF MEMBERS. The committee is composed of 26 voting members as provided by this subchapter. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.453. MEMBERS REPRESENTING STATE AGENCIES. (a) The following state agencies are entitled to be represented by one member each on the committee:
(1) the office of the attorney general;
(2) the office of the comptroller;
(3) the Railroad Commission of Texas;
(4) the General Land Office; and
(5) the Department of Agriculture.
(b) A committee member described by Subsection (a) may, as determined by rule by the governing body or officer of the state agency the member represents, be:
(1) appointed by the governing body or officer of the agency; or
(2) elected by and from the employees of the agency.
(c) The eight largest state agencies that are governed by appointed officers, not including the agencies listed under Subsection (a) or institutions of higher education, are entitled to be represented by one member each on the committee.
(d) A committee member described by Subsection (c) is elected by and from the employees of the state agency the member represents.
(e) The board of trustees shall appoint one committee member who is an employee of a state agency eligible for membership in the Texas Small State Agency Task Force.
(f) Not more than one employee from a particular state agency may serve on the committee. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.454. MEMBERS REPRESENTING INSTITUTIONS OF HIGHER EDUCATION. (a) The seven largest institutions of higher education, as determined by the number of employees on the payroll of an institution, are entitled to be represented by one member each on the committee.
(b) A committee member described by Subsection (a) must be elected from among individuals who have each been nominated by a petition signed by at least 300 employees.
(c) The Texas Higher Education Coordinating Board shall appoint two committee members who are employees of institutions of higher education, other than those institutions described by Subsection (a).
(d) Not more than one employee from an institution of higher education may serve on the committee. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.455. MEMBERS REPRESENTING PRIVATE SECTOR. (a) The governor shall appoint to the committee one member from the private sector who is an expert in employee benefit issues.
(b) The lieutenant governor shall appoint to the committee one member from the private sector who is an expert in employee benefit issues. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.456. RETIRED STATE EMPLOYEE. The board of trustees shall appoint to the committee one member who is a retired state employee. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.457. EXECUTIVE DIRECTOR. The executive director is a nonvoting member of the committee. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.458. TERM. A member of the committee is appointed or elected for a three-year term. (V.T.I.C. Art. 3.50-2, Sec. 18(b) (part).)
Sec. 1551.459. VACANCY. (a) The governing body or officer of a state agency, including an institution of higher education, shall appoint to the committee an employee of the agency to fill the remainder of a vacated term of an employee from the agency.
(b) The officer who originally appointed a committee member from the private sector shall appoint an individual to fill the remainder of that committee member's vacated term. (V.T.I.C. Art. 3.50-2, Sec. 18(b) (part).)
Sec. 1551.460. PRESIDING OFFICER. The members of the committee shall elect a presiding officer from the committee's membership to serve a one-year term. (V.T.I.C. Art. 3.50-2, Sec. 18(a) (part).)
Sec. 1551.461. DUTIES OF COMMITTEE. The committee shall:
(1) advise and consult with the board of trustees on matters concerning all group coverages provided under this chapter;
(2) present recommendations to the board regarding other existing or proposed state employee benefits, other than retirement benefits; and
(3) cooperate and work with the board in coordinating and correlating the administration of the group benefits program among the various state agencies. (V.T.I.C. Art. 3.50-2, Sec. 18(c) (part).)
Sec. 1551.462. DUTIES OF COMMITTEE MEMBERS. (a) A committee member shall secure input from fellow employees.
(b) A member's service on the committee is in addition to the duties of the member's employment or state office.
(c) An expense incurred by a member in performing a duty as a member of the committee shall be paid from funds made available for that purpose to the state agency of which the member is an employee or officer. (V.T.I.C. Art. 3.50-2, Sec. 18(c) (part).)
CHAPTER 1552. GROUP LONG-TERM CARE INSURANCE FOR STATE EMPLOYEES
Sec. 1552.001. DEFINITIONS
Sec. 1552.002. ESTABLISHMENT OF PROGRAM
Sec. 1552.003. ADMINISTERING FIRM
Sec. 1552.004. PREMIUMS
Sec. 1552.005. PROGRAM NOT PART OF OTHER GROUP
COVERAGES
Sec. 1552.006. RULES
CHAPTER 1552. GROUP LONG-TERM CARE INSURANCE FOR STATE EMPLOYEES
Sec. 1552.001. DEFINITIONS. In this chapter, "annuitant," "board of trustees," and "employee" have the meanings assigned by Section 1551.003. (V.T.I.C. Art. 3.50-2A, Subsec. (a)(2).)
Sec. 1552.002. ESTABLISHMENT OF PROGRAM. (a) The board of trustees may establish a group long-term care insurance program to provide long-term care insurance coverage for:
(1) an individual eligible to participate in the program provided by Chapter 1551 as an employee or annuitant;
(2) the spouse, parent, or grandparent of an employee or annuitant; and
(3) a parent of a spouse described by Subdivision (2).
(b) The board of trustees may not implement a group long-term care insurance program unless any cost or administrative burden associated with the development of, implementation of, or communications about the program is incidental. (V.T.I.C. Art. 3.50-2A, Subsecs. (b), (d) (part).)
Sec. 1552.003. ADMINISTERING FIRM. The board of trustees may select an administering firm to administer the group long-term care insurance program under contract with the board. (V.T.I.C. Art. 3.50-2A, Subsec. (c) (part).)
Sec. 1552.004. PREMIUMS. (a) The administering firm shall bill each program participant directly for premiums and any other program costs. Each participant is responsible for required payments.
(b) Premiums and program costs may not be deducted from a program participant's monthly compensation or annuity. (V.T.I.C. Art. 3.50-2A, Subsec. (c) (part).)
Sec. 1552.005. PROGRAM NOT PART OF OTHER GROUP COVERAGES. (a) The group long-term care insurance program is not part of the group coverages offered under Chapter 1551.
(b) The state may not contribute any part of the premiums for coverage offered under this chapter. (V.T.I.C. Art. 3.50-2A, Subsec. (d) (part).)
Sec. 1552.006. RULES. The board of trustees may adopt rules as necessary to implement this chapter, including rules specifying the coverage to be offered under the group long-term care insurance program. (V.T.I.C. Art. 3.50-2A, Subsec. (e).)
[Chapters 1553-1574 reserved for expansion]
CHAPTER 1575. TEXAS PUBLIC SCHOOL EMPLOYEES GROUP
BENEFITS PROGRAM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1575.001. SHORT TITLE
Sec. 1575.002. GENERAL DEFINITIONS
Sec. 1575.003. DEFINITION OF DEPENDENT AND RELATED TERMS
Sec. 1575.004. DEFINITION OF RETIREE
Sec. 1575.005. ISSUANCE OF CERTIFICATE OF COVERAGE
Sec. 1575.006. EXEMPTION FROM PROCESS
Sec. 1575.007. EXEMPTION FROM STATE TAXES AND FEES
Sec. 1575.008. APPLICABILITY OF OTHER LAW
[Sections 1575.009-1575.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION
Sec. 1575.051. ADMINISTRATION OF GROUP PROGRAM
Sec. 1575.052. AUTHORITY TO ADOPT RULES AND PROCEDURES;
OTHER AUTHORITY
Sec. 1575.053. PERSONNEL
Sec. 1575.054. BUDGET
Sec. 1575.055. DEPARTMENT ASSISTANCE
[Sections 1575.056-1575.100 reserved for expansion]
SUBCHAPTER C. PROVISION OF BENEFITS
Sec. 1575.101. SYSTEM AS GROUP PLAN HOLDER
Sec. 1575.102. SELF-INSURED PLANS
Sec. 1575.103. PLANS MAY VARY ACCORDING TO MEDICARE
COVERAGE
Sec. 1575.104. TERMS OF CONTRACT
Sec. 1575.105. PLAN COVERAGE SECONDARY TO CERTAIN OTHER
COVERAGE
Sec. 1575.106. COMPETITIVE BIDDING REQUIREMENTS; RULES
Sec. 1575.107. CONTRACT AWARD; CONSIDERATIONS
Sec. 1575.108. USE OF PRIVATE ENTITIES
Sec. 1575.109. USE OF HEALTH CARE PROVIDER
[Sections 1575.110-1575.150 reserved for expansion]
SUBCHAPTER D. COVERAGES AND PARTICIPATION
Sec. 1575.151. TYPES OF COVERAGES
Sec. 1575.152. BASIC PLAN MUST COVER PREEXISTING
CONDITIONS
Sec. 1575.153. AUTOMATIC BASIC COVERAGE
Sec. 1575.154. ENROLLMENT IN BASIC PLAN BY RETIREES
REQUIRED
Sec. 1575.155. COVERAGE FOR DEPENDENTS OF RETIREE
Sec. 1575.156. COVERAGE FOR SURVIVING SPOUSE OR DEPENDENTS
OF SURVIVING SPOUSE
Sec. 1575.157. COVERAGE FOR SURVIVING DEPENDENT CHILD
Sec. 1575.158. OPTIONAL GROUP HEALTH BENEFIT PLAN
Sec. 1575.159. COVERAGE FOR PROSTATE-SPECIFIC ANTIGEN TEST
Sec. 1575.160. GROUP LIFE OR ACCIDENTAL DEATH AND DISMEMBERMENT
INSURANCE: PAYMENT OF CLAIM
[Sections 1575.161-1575.200 reserved for expansion]
SUBCHAPTER E. CONTRIBUTIONS
Sec. 1575.201. ADDITIONAL STATE CONTRIBUTIONS
Sec. 1575.202. STATE CONTRIBUTION BASED ON ACTIVE EMPLOYEE
COMPENSATION
Sec. 1575.203. ACTIVE EMPLOYEE CONTRIBUTION
Sec. 1575.204. RATIO OF STATE AND ACTIVE EMPLOYEE
CONTRIBUTIONS
Sec. 1575.205. PARTICIPANT CONTRIBUTION FOR OPTIONAL PLAN
Sec. 1575.206. CONTRIBUTIONS HELD IN TRUST FOR FUND
Sec. 1575.207. INTEREST ASSESSED ON LATE PAYMENT OF DEPOSITS BY
EMPLOYING SCHOOL DISTRICTS
Sec. 1575.208. CERTIFICATION OF AMOUNT NECESSARY TO PAY STATE
CONTRIBUTIONS
Sec. 1575.209. CERTIFICATION OF AMOUNT OF STATE CONTRIBUTIONS
Sec. 1575.210. PAYMENT OF STATE CONTRIBUTIONS; RECONCILIATION
[Sections 1575.211-1575.250 reserved for expansion]
SUBCHAPTER F. FEDERAL OR PRIVATE SOURCE CONTRIBUTIONS
Sec. 1575.251. DEFINITION
Sec. 1575.252. APPLICATION BY EMPLOYER FOR MONEY TO PAY
STATE CONTRIBUTIONS
Sec. 1575.253. MONTHLY CERTIFICATION
Sec. 1575.254. MONTHLY MAINTENANCE OF INFORMATION
Sec. 1575.255. PROOF OF COMPLIANCE
Sec. 1575.256. CRIMINAL OFFENSE: FAILURE OF ADMINISTRATOR
TO COMPLY
Sec. 1575.257. CIVIL SANCTIONS FOR FAILURE OF EMPLOYER TO
COMPLY
[Sections 1575.258-1575.300 reserved for expansion]
SUBCHAPTER G. TEXAS PUBLIC SCHOOL EMPLOYEES GROUP INSURANCE FUND
Sec. 1575.301. FUND; ADMINISTRATION
Sec. 1575.302. PAYMENTS INTO FUND
Sec. 1575.303. PAYMENTS FROM FUND
Sec. 1575.304. TRANSFER OF CERTAIN CONTRIBUTIONS
Sec. 1575.305. INVESTMENT OF FUND
Sec. 1575.306. EMPLOYEE CONTRIBUTIONS PROPERTY OF FUND
ON RECEIPT; NO REFUND
[Sections 1575.307-1575.350 reserved for expansion]
SUBCHAPTER H. COORDINATED CARE NETWORK
Sec. 1575.351. DEFINITIONS
Sec. 1575.352. IMPLEMENTATION AND ADMINISTRATION
Sec. 1575.353. CONTRACTS WITH HEALTH CARE PROVIDERS AND OTHERS
Sec. 1575.354. CREDENTIALING COMMITTEES
Sec. 1575.355. IMMUNITY FROM LIABILITY ARISING FROM
ACTS OR OMISSIONS OF HEALTH CARE PROVIDER
Sec. 1575.356. IMMUNITY FROM LIABILITY ARISING FROM
EVALUATION OF QUALIFICATIONS OR CARE
Sec. 1575.357. IMMUNITY FROM LIABILITY ARISING FROM
ACTS RELATING TO CREDENTIALING COMMITTEE
Sec. 1575.358. OPEN MEETINGS LAW NOT APPLICABLE TO
CREDENTIALING COMMITTEE
Sec. 1575.359. RECORDS AND PROCEEDINGS OF CREDENTIALING
COMMITTEE NOT SUBJECT TO SUBPOENA
Sec. 1575.360. CONFIDENTIALITY
Sec. 1575.361. DISCLOSURE TO HEALTH CARE PROVIDER
Sec. 1575.362. DISCLOSURE TO CERTAIN ENTITIES
Sec. 1575.363. DISCLOSURE TO DEFENDANTS IN CIVIL
ACTIONS
[Sections 1575.364-1575.400 reserved for expansion]
SUBCHAPTER I. RETIREES ADVISORY COMMITTEE
Sec. 1575.401. DEFINITION
Sec. 1575.402. APPOINTMENT OF COMMITTEE MEMBERS
Sec. 1575.403. TERMS
Sec. 1575.404. VACANCY
Sec. 1575.405. MEETINGS
Sec. 1575.406. DUTIES
Sec. 1575.407. PROCEDURAL RULES
Sec. 1575.408. REIMBURSEMENT FOR ACTUAL AND
REASONABLE EXPENSES
[Sections 1575.409-1575.450 reserved for expansion]
SUBCHAPTER J. ACCOUNTING, REPORTS, AND RECORDS
Sec. 1575.451. ANNUAL ACCOUNTING
Sec. 1575.452. ANNUAL REPORT
Sec. 1575.453. STUDY AND REPORT BY BOARD OF TRUSTEES
Sec. 1575.454. REPORTS BY AND EXAMINATION OF
CARRIER
Sec. 1575.455. PUBLIC INSPECTION
Sec. 1575.456. CONFIDENTIALITY OF RECORDS
[Sections 1575.457-1575.500 reserved for expansion]
SUBCHAPTER K. EXPULSION FOR FRAUD
Sec. 1575.501. EXPULSION FOR FRAUD
Sec. 1575.502. HEARING
Sec. 1575.503. CONTESTED CASE
Sec. 1575.504. EXPULSION AT CONCLUSION OF HEARING
Sec. 1575.505. EFFECT OF EXPULSION
Sec. 1575.506. APPEAL
[Sections 1575.507-1575.800 reserved for expansion]
SUBCHAPTER R. COVERAGE OF ACTIVE EMPLOYEES OF
PARTICIPATING SCHOOL DISTRICTS
Sec. 1575.801. PARTICIPATION BY PUBLIC SCHOOL DISTRICTS
Sec. 1575.802. BOARD OF TRUSTEES REGULATION OF PARTICIPATION
BY SCHOOL DISTRICTS
Sec. 1575.803. PARTICIPATION BY ACTIVE EMPLOYEES AND
DEPENDENTS
Sec. 1575.804. ALTERNATIVE HEALTH BENEFIT PLAN FOR ACTIVE
EMPLOYEES
Sec. 1575.805. OPTIONAL GROUP COVERAGES FOR ACTIVE EMPLOYEES
Sec. 1575.806. SCHOOL DISTRICT CONTRIBUTION FOR ACTIVE
EMPLOYEES
Sec. 1575.807. ADDITIONAL STATE CONTRIBUTIONS AUTHORIZED
CHAPTER 1575. TEXAS PUBLIC SCHOOL EMPLOYEES GROUP
BENEFITS PROGRAM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1575.001. SHORT TITLE. This chapter may be cited as the Texas Public School Employees Group Benefits Act. (V.T.I.C. Art. 3.50-4, Sec. 1.)
Sec. 1575.002. GENERAL DEFINITIONS. In this chapter:
(1) "Active employee" means an employee as defined by Section 821.001, Government Code, who:
(A) is a member of the system; and
(B) is not entitled to coverage under a plan provided under Chapter 1551 or 1601.
(2) "Board of trustees" means the board of trustees of the Teacher Retirement System of Texas.
(3) "Carrier" means an insurance company or hospital service corporation authorized by the department under this code to provide any of the insurance coverages, benefits, or services provided by this chapter.
(4) "Fund" means the Texas public school employees group insurance fund.
(5) "Group program" means the Texas Public School Employees Group Insurance Program authorized by this chapter.
(6) "Health benefit plan" means a group insurance policy, contract, or certificate, medical or hospital service agreement, membership or subscription contract, salary continuation plan, or similar group arrangement to provide health care services or to pay or reimburse expenses of health care services.
(7) "System" means the Teacher Retirement System of Texas. (V.T.I.C. Art. 3.50-4, Secs. 2(1), (2), (4), (5), (9), (12); New.)
Sec. 1575.003. DEFINITION OF DEPENDENT AND RELATED TERMS. In this chapter:
(1) "Dependent" means:
(A) the spouse of a retiree or active employee;
(B) an unmarried child of a retiree, active employee, or deceased active employee if the child is younger than 25 years of age, including:
(i) an adopted child;
(ii) a foster child, stepchild, or other child who is in a regular parent-child relationship; or
(iii) a recognized natural child;
(C) a retiree's or active employee's recognized natural child, adopted child, foster child, stepchild, or other child, without regard to the age of the child, if the child is in a regular parent-child relationship, lives with or has the child's care provided by the retiree, active employee, or surviving spouse on a regular basis, and is mentally retarded or physically incapacitated to an extent that the child is dependent on the retiree, active employee, or surviving spouse for care or support, as determined by the board of trustees; or
(D) a deceased active employee's recognized natural child, adopted child, foster child, stepchild, or other child who is in a regular parent-child relationship, without regard to the age of the child, if, while the active employee was alive, the child:
(i) lived with or had the child's care provided by the active employee on a regular basis; and
(ii) was mentally retarded or physically incapacitated to an extent that the child was dependent on the active employee or surviving spouse for care or support, as determined by the board of trustees.
(2) "Surviving dependent child" means:
(A) the dependent child of a deceased retiree who has survived the deceased retiree and the deceased retiree's spouse; or
(B) the dependent child of a deceased active employee who has survived the deceased employee and the deceased employee's spouse if the deceased employee:
(i) had contributions made to the group program at the last place of employment of the deceased employee in public education in this state;
(ii) had 10 or more years of service credit in the system; and
(iii) died on or after September 1, 1986.
(3) "Surviving spouse" means:
(A) the surviving spouse of a deceased retiree; or
(B) the surviving spouse of a deceased active employee:
(i) for whom contributions have been made to the group program at the last place of employment of the deceased employee in public education in this state;
(ii) who had 10 or more years of service credit in the system; and
(iii) who died on or after September 1, 1986. (V.T.I.C. Art. 3.50-4, Secs. 2(3), (11), (13).)
Sec. 1575.004. DEFINITION OF RETIREE. In this chapter, "retiree" means:
(1) an individual who:
(A) has taken a service retirement under the system with at least 10 years of service credit in the system for actual service in public schools in this state; and
(B) is not eligible for coverage under a plan provided under Chapter 1551 or 1601; or
(2) an individual who:
(A) has taken a disability retirement under the system; and
(B) is entitled to receive monthly benefits from the system. (V.T.I.C. Art. 3.50-4, Sec. 2(10).)
Sec. 1575.005. ISSUANCE OF CERTIFICATE OF COVERAGE. At the time and in the circumstances specified by the board of trustees, a carrier shall issue to each retiree, surviving spouse, surviving dependent child, or active employee of a participating school district covered under this chapter a certificate of coverage that:
(1) states the benefits to which the person is entitled;
(2) states to whom the benefits are payable;
(3) states to whom a claim must be submitted; and
(4) summarizes the provisions of the coverage principally affecting the person. (V.T.I.C. Art. 3.50-4, Sec. 9.)
Sec. 1575.006. EXEMPTION FROM PROCESS. (a) The following are exempt from execution, attachment, garnishment, or any other process:
(1) benefit payments, including optional benefits payments, active employee and state contributions, and retiree, surviving spouse, and surviving dependent child contributions;
(2) any rights, benefits, or payments accruing to any person under this chapter; and
(3) any money in the fund.
(b) The items listed in Subsection (a) may not be assigned except for direct payment to benefit providers as authorized by the board of trustees by contract, rule, or otherwise. (V.T.I.C. Art. 3.50-4, Sec. 11(a).)
Sec. 1575.007. EXEMPTION FROM STATE TAXES AND FEES. A premium or contribution on a policy, insurance contract, or agreement authorized by this chapter is not subject to any state tax, regulatory fee, or surcharge, including a premium or maintenance tax or fee. (V.T.I.C. Art. 3.50-4, Sec. 11(b).)
Sec. 1575.008. APPLICABILITY OF OTHER LAW. Article 3.51 does not apply to insurance purchased under this chapter. (V.T.I.C. Art. 3.50-4, Sec. 21.)
[Sections 1575.009-1575.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION
Sec. 1575.051. ADMINISTRATION OF GROUP PROGRAM. The board of trustees shall take the actions it considers necessary to devise, implement, and administer the group program. (V.T.I.C. Art. 3.50-4, Sec. 3(b).)
Sec. 1575.052. AUTHORITY TO ADOPT RULES AND PROCEDURES; OTHER AUTHORITY. (a) The board of trustees may adopt rules, plans, procedures, and orders reasonably necessary to implement this chapter, including:
(1) minimum benefit and financing standards for group coverage for retirees, dependents, surviving spouses, surviving dependent children, and active employees of participating school districts;
(2) basic and optional group coverage for retirees, dependents, surviving spouses, surviving dependent children, and active employees of participating school districts;
(3) procedures for contributions and deductions;
(4) periods for enrollment and selection of optional coverage and procedures for enrolling and exercising options under the group program;
(5) procedures for claims administration;
(6) procedures to administer the fund; and
(7) a timetable for:
(A) developing minimum benefit and financial standards for group coverage;
(B) establishing group plans; and
(C) taking bids and awarding contracts for group plans.
(b) The board of trustees may:
(1) study the operation of all group coverage provided under this chapter; and
(2) contract for advice and counsel in implementing and administering the group program with an independent and experienced group insurance consultant or actuary who does not receive a commission from any insurance company. (V.T.I.C. Art. 3.50-4, Sec. 5.)
Sec. 1575.053. PERSONNEL. (a) The board of trustees may employ persons to assist the board in implementing this chapter.
(b) The board of trustees shall prescribe the duties and compensation of each employee of the board. (V.T.I.C. Art. 3.50-4, Sec. 4.)
Sec. 1575.054. BUDGET. Expenses incurred in developing and administering the group program shall be paid as provided by a budget adopted by the board of trustees. (V.T.I.C. Art. 3.50-4, Sec. 15(c).)
Sec. 1575.055. DEPARTMENT ASSISTANCE. The department shall, as requested by the board of trustees, assist the board in implementing and administering this chapter. (V.T.I.C. Art. 3.50-4, Sec. 19.)
[Sections 1575.056-1575.100 reserved for expansion]
SUBCHAPTER C. PROVISION OF BENEFITS
Sec. 1575.101. SYSTEM AS GROUP PLAN HOLDER. The system is the group plan holder of a plan established under this chapter. (V.T.I.C. Art. 3.50-4, Sec. 8(a) (part).)
Sec. 1575.102. SELF-INSURED PLANS. The board of trustees may self-insure any plan established under this chapter. (V.T.I.C. Art. 3.50-4, Secs. 8(a) (part), (j) (part).)
Sec. 1575.103. PLANS MAY VARY ACCORDING TO MEDICARE COVERAGE. For retirees and surviving spouses who are covered by Medicare, the board of trustees may provide one or more plans that are different from the plans provided for retirees and surviving spouses who are not covered by Medicare. (V.T.I.C. Art. 3.50-4, Sec. 8(c).)
Sec. 1575.104. TERMS OF CONTRACT. A contract for group coverage awarded by the board of trustees must meet the minimum benefit and financial standards adopted by the board. (V.T.I.C. Art. 3.50-4, Sec. 8(g).)
Sec. 1575.105. PLAN COVERAGE SECONDARY TO CERTAIN OTHER COVERAGE. The coverage provided by a plan established under this chapter:
(1) is secondary to Medicare hospital and medical insurance to the extent permitted by federal law if the retiree, dependent, surviving spouse, or surviving dependent child is entitled to receive Medicare hospital insurance benefits without charge; and
(2) may be made secondary to other coverage to which the retiree, dependent, surviving spouse, or surviving dependent child is entitled. (V.T.I.C. Art. 3.50-4, Sec. 8(h).)
Sec. 1575.106. COMPETITIVE BIDDING REQUIREMENTS; RULES. (a) A contract to provide group benefits under this chapter may be awarded only through competitive bidding under rules adopted by the board of trustees.
(b) The rules:
(1) must require that a prospective bidder provide, for each area consisting of a county and all adjacent counties, information on the number and types of qualified providers willing to participate in the plan for which the bid is made; and
(2) may provide criteria for determining whether a provider is qualified.
(c) The board of trustees may not require a bidder to demonstrate a minimum standard of provider participation.
(d) The board of trustees shall submit for competitive bidding at least every six years each contract under this chapter. (V.T.I.C. Art. 3.50-4, Secs. 8(f), (i) (part).)
Sec. 1575.107. CONTRACT AWARD; CONSIDERATIONS. (a) In awarding a contract to provide group benefits under this chapter, the board of trustees is not required to select the lowest bid and:
(1) shall consider information obtained under Section 1575.106; and
(2) may consider any relevant criteria, including the bidder's:
(A) ability to service contracts;
(B) past experiences; and
(C) financial stability.
(b) If the board of trustees awards a contract to a bidder whose bid deviates from that advertised, the board shall record the deviation and fully justify the reason for the deviation in the minutes of the next board meeting. (V.T.I.C. Art. 3.50-4, Sec. 8(i) (part).)
Sec. 1575.108. USE OF PRIVATE ENTITIES. The board of trustees may engage a private entity to collect contributions from or to settle claims in connection with a plan established by the board under this chapter. (V.T.I.C. Art. 3.50-4, Sec. 8(j) (part).)
Sec. 1575.109. USE OF HEALTH CARE PROVIDER. To provide benefits to participants in the group program, the board of trustees may contract directly with a health care provider, including a health maintenance organization, a preferred provider organization, a carrier, an administrator, and any other qualified vendor. (V.T.I.C. Art. 3.50-4, Sec. 8(k).)
[Sections 1575.110-1575.150 reserved for expansion]
SUBCHAPTER D. COVERAGES AND PARTICIPATION
Sec. 1575.151. TYPES OF COVERAGES. The board of trustees may include in a plan any coverage it considers advisable, including:
(1) life insurance;
(2) accidental death and dismemberment coverage;
(3) coverage for:
(A) hospital care and benefits;
(B) surgical care and treatment;
(C) medical care and treatment;
(D) dental care;
(E) eye care;
(F) obstetrical benefits;
(G) long-term care;
(H) prescribed drugs, medicines, and prosthetic devices; and
(I) supplemental benefits, supplies, and services in accordance with this chapter; and
(4) protection against loss of salary. (V.T.I.C. Art. 3.50-4, Sec. 8(b).)
Sec. 1575.152. BASIC PLAN MUST COVER PREEXISTING CONDITIONS. A basic plan must cover preexisting conditions. (V.T.I.C. Art. 3.50-4, Sec. 8(d).)
Sec. 1575.153. AUTOMATIC BASIC COVERAGE. A retiree or active employee of a participating school district who applies for coverage during an enrollment period may not be denied coverage in a basic plan provided under this chapter unless the board of trustees finds under Subchapter K that the individual defrauded or attempted to defraud the group program. (V.T.I.C. Art. 3.50-4, Sec. 13.)
Sec. 1575.154. ENROLLMENT IN BASIC PLAN BY RETIREES REQUIRED. A retiree must be enrolled in a basic plan offered under the group program unless:
(1) the retiree rejects enrollment in the group program in writing on a form provided by the board of trustees; or
(2) the board of trustees finds under Subchapter K that the retiree defrauded or attempted to defraud the group program. (V.T.I.C. Art. 3.50-4, Sec. 7(a).)
Sec. 1575.155. COVERAGE FOR DEPENDENTS OF RETIREE. (a) A retiree participating in the group program is entitled to secure for the retiree's dependents group coverage provided for the retiree under this chapter, as determined by the board of trustees.
(b) The additional contribution payments for the dependent coverage shall be deducted from the annuity payments to the retiree in the manner and form determined by the board of trustees. (V.T.I.C. Art. 3.50-4, Sec. 18(a).)
Sec. 1575.156. COVERAGE FOR SURVIVING SPOUSE OR DEPENDENTS OF SURVIVING SPOUSE. (a) A surviving spouse who is entitled to group coverage under this chapter may elect to retain or obtain coverage for the surviving spouse or dependents of the surviving spouse at the applicable rate for the deceased participant.
(b) A surviving spouse must provide payment of applicable contributions in the manner established by Section 1575.205 and by the board of trustees. (V.T.I.C. Art. 3.50-4, Sec. 18(b).)
Sec. 1575.157. COVERAGE FOR SURVIVING DEPENDENT CHILD. (a) A surviving dependent child, the guardian of the child's estate, or the person having custody of the child may elect to retain or obtain group coverage for the surviving dependent child at the applicable rate for a dependent.
(b) The applicable contributions must be provided in the manner established by Section 1575.205 and by the board of trustees. (V.T.I.C. Art. 3.50-4, Sec. 18(c).)
Sec. 1575.158. OPTIONAL GROUP HEALTH BENEFIT PLAN. (a) The board of trustees may, in addition to providing a basic plan, contract for and make available an optional group health benefit plan for retirees, dependents, surviving spouses, or surviving dependent children.
(b) An optional group health benefit plan may provide for:
(1) a deductible in an amount that is less than the amount for the basic plan;
(2) coinsurance in an amount that is less than the amount for the basic plan; or
(3) additional benefits as permitted under Section 1575.151. (V.T.I.C. Art. 3.50-4, Sec. 8(e) (part).)
Sec. 1575.159. COVERAGE FOR PROSTATE-SPECIFIC ANTIGEN TEST. A health benefit plan offered under the group program must provide coverage for a medically accepted prostate-specific antigen test used for the detection of prostate cancer for each male enrolled in the plan who:
(1) is at least 50 years of age; or
(2) is at least 40 years of age and:
(A) has a family history of prostate cancer; or
(B) exhibits another cancer risk factor. (V.T.I.C. Art. 3.50-4, Sec. 18D.)
Sec. 1575.160. GROUP LIFE OR ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE: PAYMENT OF CLAIM. The amount of group life insurance or group accidental death and dismemberment insurance covering a retiree, active employee, dependent, surviving spouse, or surviving dependent child on the date of death shall be paid, on the establishment of a valid claim, only to:
(1) the beneficiary designated by the person in a signed and witnessed document received before death in the office of the system; or
(2) a person in the order prescribed by Section 824.103(b), Government Code, if a beneficiary is not properly designated or a beneficiary does not exist. (V.T.I.C. Art. 3.50-4, Sec. 12.)
[Sections 1575.161-1575.200 reserved for expansion]
SUBCHAPTER E. CONTRIBUTIONS
Sec. 1575.201. ADDITIONAL STATE CONTRIBUTIONS. The state through the system shall contribute from money in the fund the total cost of the basic plan covering each participating retiree. (V.T.I.C. Art. 3.50-4, Sec. 7(b).)
Sec. 1575.202. STATE CONTRIBUTION BASED ON ACTIVE EMPLOYEE COMPENSATION. (a) Each state fiscal year, the state shall contribute to the fund an amount equal to 0.5 percent of the salary of each active employee.
(b) The state may contribute to the fund an amount in addition to the contribution required by Subsection (a). (V.T.I.C. Art. 3.50-4, Sec. 16(b).)
Sec. 1575.203. ACTIVE EMPLOYEE CONTRIBUTION. (a) Each state fiscal year, each active employee shall, as a condition of employment, contribute to the fund an amount equal to 0.25 percent of the employee's salary.
(b) The employer of an active employee shall monthly:
(1) deduct the employee's contribution from the employee's salary and remit the contribution to the system in the manner required by the board of trustees; or
(2) assume and pay the total contributions due from its active employees.
(c) Contributions to the fund deducted from the salary of an active employee are included in annual compensation for purposes of the system. (V.T.I.C. Art. 3.50-4, Secs. 16(a), (e).)
Sec. 1575.204. RATIO OF STATE AND ACTIVE EMPLOYEE CONTRIBUTIONS. If the amount of state and active employee contributions to the fund is raised by the legislature above the percentages provided by Sections 1575.202 and 1575.203 to provide adequate funding for the group program, the ratio between the state's contribution and the active employees' contributions must be maintained at two to one. (V.T.I.C. Art. 3.50-4, Sec. 16(c).)
Sec. 1575.205. PARTICIPANT CONTRIBUTION FOR OPTIONAL PLAN. (a) A retiree, surviving spouse, or surviving dependent child who elects an optional plan shall pay a monthly contribution to cover the cost of the plan. The board of trustees shall adopt rules for the collection of additional contributions.
(b) As a condition of electing coverage under an optional plan, a retiree or surviving spouse must, in writing, authorize the board of trustees to deduct the amount of the contribution from the person's monthly annuity payment.
(c) The board of trustees may spend a part of the money received for the group program to offset a part of the costs for optional coverage paid by retirees if the expenditure does not reduce the period the group program is projected to remain financially solvent by more than one year in a biennium. (V.T.I.C. Art. 3.50-4, Secs. 8(e) (part), 14.)
Sec. 1575.206. CONTRIBUTIONS HELD IN TRUST FOR FUND. An employing school district and its trustees:
(1) hold contributions required by this subchapter in trust for the fund and its participants; and
(2) may not divert the contributions for any other purpose. (V.T.I.C. Art. 3.50-4, Sec. 16(i).)
Sec. 1575.207. INTEREST ASSESSED ON LATE PAYMENT OF DEPOSITS BY EMPLOYING SCHOOL DISTRICTS. An employing school district that does not remit to the board of trustees all contributions required by this subchapter before the 11th day after the last day of the month shall pay to the fund:
(1) the contributions; and
(2) interest on the unpaid amounts at the annual rate of six percent compounded monthly. (V.T.I.C. Art. 3.50-4, Sec. 16(h).)
Sec. 1575.208. CERTIFICATION OF AMOUNT NECESSARY TO PAY STATE CONTRIBUTIONS. Not later than October 31 preceding each regular session of the legislature, the board of trustees shall certify the amount necessary to pay the state contributions to the fund to:
(1) the Legislative Budget Board; and
(2) the budget division of the governor's office. (V.T.I.C. Art. 3.50-4, Sec. 16(f) (part).)
Sec. 1575.209. CERTIFICATION OF AMOUNT OF STATE CONTRIBUTIONS. Not later than August 31 of each year, the board of trustees shall certify to the comptroller the estimated amount of state contributions to be received by the fund for the next fiscal year under the appropriations authorized by this chapter. (V.T.I.C. Art. 3.50-4, Sec. 16(f) (part).)
Sec. 1575.210. PAYMENT OF STATE CONTRIBUTIONS; RECONCILIATION. (a) Contributions allocated and appropriated under this subchapter for a state fiscal year shall be:
(1) paid from the general revenue fund in equal monthly installments;
(2) based on the estimated amount certified by the board of trustees to the comptroller for that year; and
(3) subject to any express limitations specified in the Act making the appropriation.
(b) A variation between the certified amount and the actual amount due for the state fiscal year shall be reconciled at the end of the fiscal year, and the annual contributions to the fund shall be adjusted accordingly. (V.T.I.C. Art. 3.50-4, Sec. 16(g).)
[Sections 1575.211-1575.250 reserved for expansion]
SUBCHAPTER F. FEDERAL OR PRIVATE SOURCE CONTRIBUTIONS
Sec. 1575.251. DEFINITION. In this subchapter, "employer" has the meaning assigned by Section 821.001, Government Code. (V.T.I.C. Art. 3.50-4, Sec. 16A(a).)
Sec. 1575.252. APPLICATION BY EMPLOYER FOR MONEY TO PAY STATE CONTRIBUTIONS. An employer who applies for money provided by the United States or a privately sponsored source shall:
(1) if any of the money will pay part or all of an active employee's salary, also apply for any legally available money to pay state contributions required by Subchapter E; and
(2) immediately send any money received for state contributions as a result of the application to the system for deposit in the general revenue fund. (V.T.I.C. Art. 3.50-4, Secs. 16A(b), (c).)
Sec. 1575.253. MONTHLY CERTIFICATION. An employer shall monthly certify to the board of trustees in a form prescribed by the board:
(1) the total amount of salary paid from federal funds and private grants; and
(2) the total amount of state contributions provided by the funds and grants. (V.T.I.C. Art. 3.50-4, Sec. 16A(d) (part).)
Sec. 1575.254. MONTHLY MAINTENANCE OF INFORMATION. An employer shall monthly maintain:
(1) the name of each employee whose salary is paid wholly or partly from a grant;
(2) the source of the grant;
(3) the amount of the employee's salary paid from the grant;
(4) the amount of the money provided by the grant for state contributions for the employee; and
(5) any other information the board of trustees determines is necessary to enforce this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 16A(d) (part).)
Sec. 1575.255. PROOF OF COMPLIANCE. The board of trustees may:
(1) require an employer to report an application for federal or private money;
(2) require evidence that the application includes a request for funds available to pay state contributions for active employees; and
(3) examine the records of an employer to determine compliance with this subchapter and rules adopted under this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 16A(e).)
Sec. 1575.256. CRIMINAL OFFENSE: FAILURE OF ADMINISTRATOR TO COMPLY. (a) An administrator of an employer commits an offense if the administrator knowingly fails to comply with this subchapter.
(b) An offense under this section is a Class C misdemeanor. (V.T.I.C. Art. 3.50-4, Secs. 16A(f), (g).)
Sec. 1575.257. CIVIL SANCTIONS FOR FAILURE OF EMPLOYER TO COMPLY. (a) An employer who fails to comply with this subchapter may not apply for or spend any money received from a federal or private grant.
(b) The board of trustees shall report an alleged noncompliance with this subchapter to the attorney general, the Legislative Budget Board, the comptroller, and the governor.
(c) On receipt of a report under Subsection (b), the attorney general shall bring a writ of mandamus against the employer to compel compliance with this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 16A(h).)
[Sections 1575.258-1575.300 reserved for expansion]
SUBCHAPTER G. TEXAS PUBLIC SCHOOL EMPLOYEES GROUP INSURANCE FUND
Sec. 1575.301. FUND; ADMINISTRATION. (a) The Texas public school employees group insurance fund is a trust fund with the comptroller, who is custodian of the fund.
(b) The board of trustees shall administer the fund. (V.T.I.C. Art. 3.50-4, Sec. 15(a) (part).)
Sec. 1575.302. PAYMENTS INTO FUND. The following shall be paid into the fund:
(1) contributions from active employees and the state, including contributions for optional coverages;
(2) investment income;
(3) appropriations for implementation of the group program; and
(4) other money required or authorized to be paid into the fund. (V.T.I.C. Art. 3.50-4, Sec. 15(a) (part).)
Sec. 1575.303. PAYMENTS FROM FUND. (a) The following shall, without state fiscal year limitation, be paid from the fund:
(1) the appropriate premiums to a carrier providing group coverage under a plan under this chapter;
(2) claims for benefits under the group coverage; and
(3) money spent by the board of trustees to administer the group program.
(b) The appropriate portion of the contributions to the fund to provide for incurred but unreported claim reserves and contingency reserves, as determined by the board of trustees, shall be retained in the fund. (V.T.I.C. Art. 3.50-4, Sec. 15(a) (part).)
Sec. 1575.304. TRANSFER OF CERTAIN CONTRIBUTIONS. The board of trustees shall transfer into the fund the amounts deducted from annuities for contributions. (V.T.I.C. Art. 3.50-4, Sec. 15(b).)
Sec. 1575.305. INVESTMENT OF FUND. The board of trustees may invest money in the fund in the manner provided by Subchapter D, Chapter 825, Government Code, for assets of the system. (V.T.I.C. Art. 3.50-4, Sec. 15(d).)
Sec. 1575.306. EMPLOYEE CONTRIBUTIONS PROPERTY OF FUND ON RECEIPT; NO REFUND. A contribution from an active employee:
(1) is the property of the fund on receipt by the system; and
(2) may not be refunded to the active employee under any circumstances, including termination of employment. (V.T.I.C. Art. 3.50-4, Sec. 16(d).)
[Sections 1575.307-1575.350 reserved for expansion]
SUBCHAPTER H. COORDINATED CARE NETWORK
Sec. 1575.351. DEFINITIONS. In this subchapter:
(1) "Credentialing committee" means a credentialing committee created by the board of trustees under Section 1575.354.
(2) "Health care provider" means:
(A) an individual licensed as a health care practitioner; or
(B) a health care facility.
(3) "Network" means the coordinated care network established by the board of trustees under this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 18C(j); New.)
Sec. 1575.352. IMPLEMENTATION AND ADMINISTRATION. The board of trustees may implement and administer a coordinated care network for the group program. (V.T.I.C. Art. 3.50-4, Sec. 18C(a) (part).)
Sec. 1575.353. CONTRACTS WITH HEALTH CARE PROVIDERS AND OTHERS. As the board of trustees determines is necessary to implement and administer the network, the board may contract with a health care provider or other individuals or entities. (V.T.I.C. Art. 3.50-4, Secs. 18C(a) (part), (b).)
Sec. 1575.354. CREDENTIALING COMMITTEES. The board of trustees may establish credentialing committees to evaluate the qualifications of health care providers to participate in the network. (V.T.I.C. Art. 3.50-4, Sec. 18C(a) (part).)
Sec. 1575.355. IMMUNITY FROM LIABILITY ARISING FROM ACTS OR OMISSIONS OF HEALTH CARE PROVIDER. (a) The following are not liable for damages arising from an act or omission of a health care provider participating in the network:
(1) the system and its officers and employees, including the board of trustees;
(2) the group program;
(3) the fund; and
(4) a member of an advisory committee to the board of trustees.
(b) A health care provider participating in the network is an independent contractor and is responsible for the provider's acts or omissions. (V.T.I.C. Art. 3.50-4, Sec. 18C(c).)
Sec. 1575.356. IMMUNITY FROM LIABILITY ARISING FROM EVALUATION OF QUALIFICATIONS OR CARE. The following are not liable for damages arising from an act, including a statement, determination, report of an act, or recommendation, committed without malice in the course of the evaluation of the qualifications of a health care provider or of the patient care provided by a health care provider participating in the network:
(1) the system and its officers and employees, including the board of trustees;
(2) the group program;
(3) the fund;
(4) a member of an advisory committee to the board of trustees; and
(5) a member of a credentialing committee. (V.T.I.C. Art. 3.50-4, Sec. 18C(d).)
Sec. 1575.357. IMMUNITY FROM LIABILITY ARISING FROM ACTS RELATING TO CREDENTIALING COMMITTEE. An individual, a health care provider, or a medical peer review committee is not liable for damages arising from an act committed without malice that consists of:
(1) participating in the activity of a credentialing committee; or
(2) furnishing records, information, or assistance to a credentialing committee. (V.T.I.C. Art. 3.50-4, Sec. 18C(f).)
Sec. 1575.358. OPEN MEETINGS LAW NOT APPLICABLE TO CREDENTIALING COMMITTEE. The proceedings of a credentialing committee are not subject to Chapter 551, Government Code. (V.T.I.C. Art. 3.50-4, Sec. 18C(e) (part).)
Sec. 1575.359. RECORDS AND PROCEEDINGS OF CREDENTIALING COMMITTEE NOT SUBJECT TO SUBPOENA. Except to the extent required by the constitution of this state or the United States, the records and proceedings of a credentialing committee and a communication made to a credentialing committee are not subject to court subpoena. (V.T.I.C. Art. 3.50-4, Sec. 18C(e) (part).)
Sec. 1575.360. CONFIDENTIALITY. Except as otherwise provided by this subchapter:
(1) proceedings and records of a credentialing committee are confidential; and
(2) a communication made to a credentialing committee is privileged. (V.T.I.C. Art. 3.50-4, Sec. 18C(e) (part).)
Sec. 1575.361. DISCLOSURE TO HEALTH CARE PROVIDER. Disclosure of confidential credentialing committee information that is relevant to the matter under review to an affected health care provider is not a waiver of the confidentiality requirements under this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 18C(g).)
Sec. 1575.362. DISCLOSURE TO CERTAIN ENTITIES. (a) A written or oral communication made to a credentialing committee, or a record or proceeding of the committee, may be disclosed to an appropriate:
(1) state or federal agency, including a state board of registration or licensing;
(2) national accreditation body; or
(3) medical peer review committee.
(b) A disclosure under this section is not a waiver of the confidential and privileged nature of the information. (V.T.I.C. Art. 3.50-4, Sec. 18C(h).)
Sec. 1575.363. DISCLOSURE TO DEFENDANTS IN CIVIL ACTIONS. (a) Any of the following persons named as a defendant in any civil action filed as a result of participation in the credentialing process may use, including in the person's own defense, otherwise confidential information obtained for legitimate internal business and professional purposes:
(1) the system and its officers and employees, including the board of trustees;
(2) a credentialing committee;
(3) a person participating in a credentialing review;
(4) a health care provider;
(5) the group program; and
(6) a member of an advisory committee.
(b) Use of information under this section is not a waiver of the confidential and privileged nature of the information. (V.T.I.C. Art. 3.50-4, Sec. 18C(i).)
[Sections 1575.364-1575.400 reserved for expansion]
SUBCHAPTER I. RETIREES ADVISORY COMMITTEE
Sec. 1575.401. DEFINITION. In this subchapter, "committee" means the Retirees Advisory Committee. (New.)
Sec. 1575.402. APPOINTMENT OF COMMITTEE MEMBERS. (a) The Retirees Advisory Committee is composed of the following nine members appointed by the board of trustees:
(1) one member who is an active school administrator;
(2) one member who is a retired school administrator;
(3) two members who are active teachers;
(4) three members who are retired teachers;
(5) one member who is an active member of the auxiliary personnel of a school district; and
(6) one member who is a retired member of the auxiliary personnel of a school district.
(b) A person is not eligible for appointment as a member of the committee if the person is required to register as a lobbyist under Chapter 305, Government Code. (V.T.I.C. Art. 3.50-4, Secs. 6(a), (f).)
Sec. 1575.403. TERMS. (a) Members of the committee serve staggered four-year terms.
(b) Five members' terms, including the terms of the active school administrator, one active teacher, two retired teachers, and the retired member of the auxiliary personnel, expire February 1, 2002, and every fourth year after that date.
(c) The remaining members' terms expire February 1, 2004, and every fourth year after that date. (V.T.I.C. Art. 3.50-4, Sec. 6(b) (part).)
Sec. 1575.404. VACANCY. The board of trustees shall fill a vacancy on the committee by appointing a person who meets the qualifications applicable to the vacated position. (V.T.I.C. Art. 3.50-4, Sec. 6(b) (part).)
Sec. 1575.405. MEETINGS. (a) The committee shall meet:
(1) at least twice each year; and
(2) at the call of the board of trustees.
(b) If there is an emergency, the committee may meet at the call of a majority of the members of the committee. (V.T.I.C. Art. 3.50-4, Sec. 6(e).)
Sec. 1575.406. DUTIES. The committee shall:
(1) hold public hearings on group coverage;
(2) recommend to the board of trustees minimum standards and features of a plan under the group program that the committee considers appropriate; and
(3) recommend to the board of trustees desirable changes in rules and legislation affecting the group program. (V.T.I.C. Art. 3.50-4, Sec. 6(c).)
Sec. 1575.407. PROCEDURAL RULES. The board of trustees shall adopt procedural rules for the committee to follow in implementing its powers and duties under this subchapter. (V.T.I.C. Art. 3.50-4, Sec. 6(d).)
Sec. 1575.408. REIMBURSEMENT FOR ACTUAL AND REASONABLE EXPENSES. A committee member is entitled to reimbursement for actual and reasonable expenses incurred in performing functions as a committee member. (V.T.I.C. Art. 3.50-4, Sec. 6(g).)
[Sections 1575.409-1575.450 reserved for expansion]
SUBCHAPTER J. ACCOUNTING, REPORTS, AND RECORDS
Sec. 1575.451. ANNUAL ACCOUNTING. (a) In this section, "plan year" means the period beginning on September 1 and ending on the following August 31.
(b) Group coverage purchased under this chapter must provide for an accounting to the board of trustees by each carrier providing the coverage.
(c) The accounting must be submitted:
(1) not later than the 90th day after the last day of each plan year; and
(2) on a form approved by the board of trustees.
(d) Each carrier shall prepare any other report that the board of trustees considers necessary.
(e) A carrier may not assess an extra charge for an accounting report. (V.T.I.C. Art. 3.50-4, Secs. 2(8), 10(b).)
Sec. 1575.452. ANNUAL REPORT. Not later than the 180th day after the last day of each state fiscal year, the board of trustees shall submit a written report to the department concerning the group coverages provided to and the benefits and services being received by individuals covered under this chapter. (V.T.I.C. Art. 3.50-4, Sec. 10(a).)
Sec. 1575.453. STUDY AND REPORT BY BOARD OF TRUSTEES. (a) The board of trustees shall study the operation and administration of this chapter, including:
(1) conducting surveys and preparing reports on financing group coverages and health benefit plans available to participants; and
(2) studying the experience and projected cost of coverage.
(b) The board of trustees shall report to the legislature at each regular session on the operation and administration of this chapter. (V.T.I.C. Art. 3.50-4, Sec. 17(a).)
Sec. 1575.454. REPORTS BY AND EXAMINATION OF CARRIER. Each contract entered into under this chapter between the board of trustees and a carrier must require the carrier to:
(1) furnish to the board in a timely manner reasonable reports that the board determines are necessary to implement this chapter; and
(2) permit the board and the state auditor to examine records of the carrier as necessary to implement this chapter. (V.T.I.C. Art. 3.50-4, Sec. 17(b).)
Sec. 1575.455. PUBLIC INSPECTION. A report required by this chapter shall be made available for public inspection in a form that protects the identity of individual claimants. (V.T.I.C. Art. 3.50-4, Sec. 10(c).)
Sec. 1575.456. CONFIDENTIALITY OF RECORDS. (a) Section 825.507, Government Code, applies to information in records in the custody of the system relating to a retiree, active employee, annuitant, or beneficiary under the group program.
(b) The system may disclose to a health or benefit provider information in the records of an individual that the system determines is necessary to administer the group program. (V.T.I.C. Art. 3.50-4, Sec. 18B.)
[Sections 1575.457-1575.500 reserved for expansion]
SUBCHAPTER K. EXPULSION FOR FRAUD
Sec. 1575.501. EXPULSION FOR FRAUD. After notice and hearing as provided by this subchapter, the board of trustees may expel from participation in the group program a retiree, active employee, dependent, surviving spouse, or surviving dependent child who:
(1) submits a fraudulent claim or application for coverage under the group program; or
(2) defrauds or attempts to defraud a health benefit plan offered under the group program. (V.T.I.C. Art. 3.50-4, Sec. 18A(a).)
Sec. 1575.502. HEARING. On receipt of a complaint or on its own motion, the board of trustees may call and hold a hearing to determine whether an individual has acted in the manner described by Section 1575.501. (V.T.I.C. Art. 3.50-4, Sec. 18A(b).)
Sec. 1575.503. CONTESTED CASE. A proceeding under this subchapter is a contested case under Chapter 2001, Government Code. (V.T.I.C. Art. 3.50-4, Sec. 18A(c).)
Sec. 1575.504. EXPULSION AT CONCLUSION OF HEARING. At the conclusion of the hearing under Section 1575.502, if the board of trustees determines that the individual acted in the manner described by Section 1575.501, the board shall expel the individual from participation in the group program. (V.T.I.C. Art. 3.50-4, Sec. 18A(d).)
Sec. 1575.505. EFFECT OF EXPULSION. An individual expelled from participation in the group program may not be covered by a health benefit plan offered under the group program for a period determined by the board of trustees, not to exceed five years, beginning on the date the expulsion takes effect. (V.T.I.C. Art. 3.50-4, Sec. 18A(f).)
Sec. 1575.506. APPEAL. An appeal of a determination by the board of trustees under this subchapter is under the substantial evidence rule. (V.T.I.C. Art. 3.50-4, Sec. 18A(e).)
[Sections 1575.507-1575.800 reserved for expansion]
SUBCHAPTER R. COVERAGE OF ACTIVE EMPLOYEES
OF PARTICIPATING SCHOOL DISTRICTS
Sec. 1575.801. PARTICIPATION BY PUBLIC SCHOOL DISTRICTS. (a) A public school district may elect to participate in the group program.
(b) A district that participates in the group program must accept the schedule of costs adopted by the board of trustees.
(c) The sum of premiums and administrative fees received from participating school districts and the active employees of the participating school districts must cover all expenses of school district employee participation in the group program. (V.T.I.C. Art. 3.50-4, Secs. 7A(a) (part), (c) (part).)
Sec. 1575.802. BOARD OF TRUSTEES REGULATION OF PARTICIPATION BY SCHOOL DISTRICTS. (a) The board of trustees by rule shall provide:
(1) eligibility requirements for participation by a school district in the group program;
(2) restrictions on the ability of a school district to begin or discontinue participation in the group program;
(3) administrative fees to be paid by participating school districts to cover the board's administrative costs in extending the group program to active employees; and
(4) requirements to minimize the effects of adverse selection on the group program.
(b) The eligibility requirements under Subsection (a)(1) may include criteria based on size.
(c) The restrictions under Subsection (a)(2) may include:
(1) a minimum period of participation; and
(2) limited periods for elections to begin or discontinue participation. (V.T.I.C. Art. 3.50-4, Sec. 7A(b).)
Sec. 1575.803. PARTICIPATION BY ACTIVE EMPLOYEES AND DEPENDENTS. (a) An active employee of a participating school district may elect to participate in the group program.
(b) A school district may not offer a financial incentive to an active employee for declining to participate in the group program.
(c) An active employee of a participating school district is entitled to obtain coverage for dependents in the same manner as a participating retiree. (V.T.I.C. Art. 3.50-4, Sec. 7A(d).)
Sec. 1575.804. ALTERNATIVE HEALTH BENEFIT PLAN FOR ACTIVE EMPLOYEES. A school district that participates in the group program may offer an alternative health benefit plan to its active employees during the period of its participation if the board of trustees approves the plan as providing contributions, participation, and a design that are in accordance with sound group benefit underwriting principles. (V.T.I.C. Art. 3.50-4, Sec. 7A(a) (part).)
Sec. 1575.805. OPTIONAL GROUP COVERAGES FOR ACTIVE EMPLOYEES. (a) The board of trustees shall provide optional group coverages for active employees participating in the group program.
(b) The coverages may be combined with or similar to, but separate from, coverages provided to retirees. (V.T.I.C. Art. 3.50-4, Sec. 7A(c) (part).)
Sec. 1575.806. SCHOOL DISTRICT CONTRIBUTION FOR ACTIVE EMPLOYEES. (a) Each participating school district shall contribute for each of its employees covered under the group program an amount equal to at least 75 percent of the cost for the employee only.
(b) The district shall certify to the board of trustees the amount the district will contribute monthly.
(c) The board of trustees shall determine if the monthly contribution is sufficient to underwrite the plan for the district based on sound group benefit underwriting principles. A determination by the board under this subsection is final.
(d) Each employee covered under the group program shall pay that portion of the cost of coverage selected by the employee that exceeds the amount of the employer contribution. (V.T.I.C. Art. 3.50-4, Secs. 7A(e), (f).)
Sec. 1575.807. ADDITIONAL STATE CONTRIBUTIONS AUTHORIZED. The state may contribute to the fund an amount in addition to the contribution required by Section 1575.202 to assist in the expansion of the group program to active employees of participating school districts. (V.T.I.C. Art. 3.50-4, Sec. 7A(h).)
CHAPTER 1576. GROUP LONG-TERM CARE INSURANCE FOR PUBLIC SCHOOL
EMPLOYEES
Sec. 1576.001. DEFINITIONS
Sec. 1576.002. ESTABLISHMENT OF PROGRAM
Sec. 1576.003. ADMINISTERING FIRM
Sec. 1576.004. PREMIUMS
Sec. 1576.005. PROGRAM NOT PART OF OTHER GROUP COVERAGES
Sec. 1576.006. RULES
CHAPTER 1576. GROUP LONG-TERM CARE INSURANCE FOR PUBLIC SCHOOL
EMPLOYEES
Sec. 1576.001. DEFINITIONS. In this chapter:
(1) "Active employee" has the meaning assigned by Section 1575.002.
(2) "Board of trustees" means the board of trustees of the Teacher Retirement System of Texas.
(3) "Retiree" has the meaning assigned by Section 1575.004.
(4) "Surviving spouse" has the meaning assigned by Section 1575.003. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsec. (a)(2).)
Sec. 1576.002. ESTABLISHMENT OF PROGRAM. (a) The board of trustees may establish a group long-term care insurance program to provide long-term care insurance coverage for:
(1) an active employee or retiree;
(2) the spouse of an active employee or retiree, including a surviving spouse;
(3) a parent or grandparent of an active employee or retiree; and
(4) a parent of the spouse of an employee or retiree, including a parent of a surviving spouse.
(b) The board of trustees may not implement a group long-term care insurance program unless any cost or administrative burden associated with the development of, implementation of, or communications about the program is incidental. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsecs. (b), (c) (part).)
Sec. 1576.003. ADMINISTERING FIRM. The board of trustees may select an administering firm to administer the group long-term care insurance program under contract with the board. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsec. (c) (part).)
Sec. 1576.004. PREMIUMS. The administering firm shall bill each program participant directly for premiums and any other program costs. Each participant is responsible for required payments. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsec. (c) (part).)
Sec. 1576.005. PROGRAM NOT PART OF OTHER GROUP COVERAGES. (a) The group long-term care insurance program is not part of the group coverages offered under Chapter 1575.
(b) The state may not contribute any part of the premiums for coverage offered under this chapter. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsec. (d).)
Sec. 1576.006. RULES. The board of trustees may adopt rules as necessary to implement this chapter, including rules specifying the coverage to be offered under the group long-term care insurance program. (V.T.I.C. Art. 3.50-4A, as added by Section 2, Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, Subsec. (e).)
CHAPTER 1577. REQUIRED AVAILABILITY OF INSURANCE
FOR SCHOOL DISTRICT EMPLOYEES AND RETIREES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1577.001. DEFINITIONS
Sec. 1577.002. RULES
[Sections 1577.003-1577.050 reserved for expansion]
SUBCHAPTER B. COVERAGES
Sec. 1577.051. OPTIONAL PERMANENT LIFE INSURANCE
Sec. 1577.052. OPTIONAL LONG-TERM CARE INSURANCE
Sec. 1577.053. OPTIONAL DISABILITY INSURANCE
Sec. 1577.054. AVAILABILITY OF COVERAGE
Sec. 1577.055. OPEN ENROLLMENT PERIODS
[Sections 1577.056-1577.100 reserved for expansion]
SUBCHAPTER C. AWARD OF CONTRACTS
Sec. 1577.101. CONTRACTS TO PROVIDE COVERAGES
Sec. 1577.102. COMPETITIVE BIDDING REQUIREMENTS; RULES
Sec. 1577.103. CONTRACT AWARD; CONSIDERATIONS
Sec. 1577.104. SELECTION OF CONTRACTORS
[Sections 1577.105-1577.150 reserved for expansion]
SUBCHAPTER D. PREMIUMS
Sec. 1577.151. RESPONSIBILITY FOR PREMIUMS
Sec. 1577.152. PAYMENT OF PREMIUMS
[Sections 1577.153-1577.200 reserved for expansion]
SUBCHAPTER E. SCHOOL DISTRICT EMPLOYEES AND RETIREES
OPTIONAL INSURANCE TRUST FUND
Sec. 1577.201. DEFINITION
Sec. 1577.202. SCHOOL DISTRICT EMPLOYEES AND RETIREES
OPTIONAL INSURANCE TRUST FUND;
ADMINISTRATION
Sec. 1577.203. PAYMENTS INTO FUND
Sec. 1577.204. PAYMENTS FROM FUND
Sec. 1577.205. INVESTMENT OF FUND
CHAPTER 1577. REQUIRED AVAILABILITY OF INSURANCE
FOR SCHOOL DISTRICT EMPLOYEES AND RETIREES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1577.001. DEFINITIONS. In this chapter:
(1) "Board of trustees" means the board of trustees of the Teacher Retirement System of Texas.
(2) "Employee" means an individual who:
(A) is a participating member of the system; and
(B) does not participate in a group insurance program provided under Chapter 1551 or 1601.
(3) "Retiree" means:
(A) an individual who:
(i) has taken a service retirement under the system with at least 10 years of service credit in the system for service in public schools in this state; and
(ii) is not eligible to participate in a group insurance program provided under Chapter 1551 or 1601; or
(B) an individual who:
(i) has taken a disability retirement under the system and is entitled to receive an annuity from the system based on the individual's service; and
(ii) is not eligible to participate in a group insurance program provided under Chapter 1551 or 1601.
(4) "System" means the Teacher Retirement System of Texas. (V.T.I.C. Art. 3.50-4A, Sec. 1, as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27; New.)
Sec. 1577.002. RULES. The board of trustees may adopt rules necessary to administer this chapter. (V.T.I.C. Art. 3.50-4A, Sec. 3(b), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
[Sections 1577.003-1577.050 reserved for expansion]
SUBCHAPTER B. COVERAGES
Sec. 1577.051. OPTIONAL PERMANENT LIFE INSURANCE. The board of trustees shall offer employees and retirees optional permanent life insurance coverage. (V.T.I.C. Art. 3.50-4A, Sec. 2(a) (part), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.052. OPTIONAL LONG-TERM CARE INSURANCE. (a) The board of trustees shall offer employees and retirees optional long-term care insurance coverage.
(b) The long-term care insurance must provide coverage for home, community, and institutional care. (V.T.I.C. Art. 3.50-4A, Sec. 2(b) (part), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.053. OPTIONAL DISABILITY INSURANCE. The board of trustees shall offer employees optional insurance coverage against short-term or long-term loss of salary because of disability. (V.T.I.C. Art. 3.50-4A, Sec. 2(c) (part), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.054. AVAILABILITY OF COVERAGE. The board of trustees shall offer the insurance coverages provided under this chapter to:
(1) employees through their employers; and
(2) retirees through the board's administration of the system. (V.T.I.C. Art. 3.50-4A, Sec. 4(a), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.055. OPEN ENROLLMENT PERIODS. Insurance coverages provided under this chapter shall be made available periodically during open enrollment periods as determined by the board of trustees. (V.T.I.C. Art. 3.50-4A, Sec. 2(e), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
[Sections 1577.056-1577.100 reserved for expansion]
SUBCHAPTER C. AWARD OF CONTRACTS
Sec. 1577.101. CONTRACTS TO PROVIDE COVERAGES. The board of trustees shall contract with one or more carriers authorized to provide the applicable type of insurance to provide each type of coverage required by Subchapter B. (V.T.I.C. Art. 3.50-4A, Secs. 2(a), (b) (part), (c), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.102. COMPETITIVE BIDDING REQUIREMENTS; RULES. (a) A contract to provide benefits under this chapter may be awarded only through competitive bidding under rules adopted by the board of trustees.
(b) The rules may provide criteria for determining whether a carrier is qualified. (V.T.I.C. Art. 3.50-4A, Sec. 2(d) (part), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.103. CONTRACT AWARD; CONSIDERATIONS. (a) In awarding a contract under this chapter, the board of trustees is not required to select the lowest bid and may consider any relevant criteria, including a bidder's:
(1) ability to service contracts;
(2) past experiences; and
(3) financial stability.
(b) If the board of trustees awards a contract to a bidder whose bid deviates from that advertised, the board shall record the deviation and fully justify the reason for the deviation in the minutes of the next board meeting. (V.T.I.C. Art. 3.50-4A, Sec. 2(d) (part), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.104. SELECTION OF CONTRACTORS. (a) The board of trustees shall adopt rules for the selection of contractors under this chapter.
(b) The rules must require a contractor to:
(1) administer enrollment, adjudicate claims, and coordinate services under the insurance coverage; and
(2) account for premiums collected and disbursed under the insurance coverage. (V.T.I.C. Art. 3.50-4A, Sec. 3(a), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
[Sections 1577.105-1577.150 reserved for expansion]
SUBCHAPTER D. PREMIUMS
Sec. 1577.151. RESPONSIBILITY FOR PREMIUMS. The participants in a plan of insurance coverage provided under this chapter are responsible for the full cost of premiums. (V.T.I.C. Art. 3.50-4A, Sec. 4(b), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.152. PAYMENT OF PREMIUMS. (a) An employee participating in a plan of insurance coverage provided under this chapter shall pay premiums by payroll deduction remitted by the employee's employer at the times and in the manner determined by the board of trustees.
(b) A retiree participating in a plan of insurance coverage provided under this chapter shall pay premiums by deduction from the retiree's monthly retirement annuity. (V.T.I.C. Art. 3.50-4A, Secs. 4(c), (d), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
[Sections 1577.153-1577.200 reserved for expansion]
SUBCHAPTER E. SCHOOL DISTRICT EMPLOYEES AND RETIREES
OPTIONAL INSURANCE TRUST FUND
Sec. 1577.201. DEFINITION. In this subchapter, "fund" means the school district employees and retirees optional insurance trust fund. (New.)
Sec. 1577.202. SCHOOL DISTRICT EMPLOYEES AND RETIREES OPTIONAL INSURANCE TRUST FUND; ADMINISTRATION. (a) The school district employees and retirees optional insurance trust fund is a trust fund with the comptroller.
(b) The board of trustees shall administer the fund on behalf of the participants in the plans of insurance coverage provided under this chapter. (V.T.I.C. Art. 3.50-4A, Sec. 5(a), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.203. PAYMENTS INTO FUND. The following shall be credited to the fund:
(1) premiums from participants in plans of insurance coverage provided under this chapter;
(2) money recovered under contracts for providing insurance coverage under this chapter; and
(3) investment and depository income of the fund. (V.T.I.C. Art. 3.50-4A, Sec. 5(b), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.204. PAYMENTS FROM FUND. Money in the fund may be used only to provide insurance coverage under this chapter, including the payment of administration expenses. (V.T.I.C. Art. 3.50-4A, Sec. 5(c), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
Sec. 1577.205. INVESTMENT OF FUND. The board of trustees may invest the fund in the manner provided by Section 67(a)(3), Article XVI, Texas Constitution. (V.T.I.C. Art. 3.50-4A, Sec. 5(d), as added Acts 76th Leg., R.S., Ch. 1540, Sec. 27.)
CHAPTER 1578. PURCHASE OF INSURANCE BY ASSOCIATION OF
TEACHERS AND SCHOOL ADMINISTRATORS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1578.001. APPLICABILITY OF CHAPTER
Sec. 1578.002. AUTHORITY TO ISSUE
[Sections 1578.003-1578.050 reserved for expansion]
SUBCHAPTER B. PURCHASE OF INSURANCE
Sec. 1578.051. AUTHORITY TO OBTAIN INSURANCE
Sec. 1578.052. PAYMENT OF PREMIUM
Sec. 1578.053. MINIMUM REQUIREMENTS TO OBTAIN POLICY
Sec. 1578.054. AMOUNT OF INSURANCE
CHAPTER 1578. PURCHASE OF INSURANCE BY ASSOCIATION OF
TEACHERS AND SCHOOL ADMINISTRATORS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1578.001. APPLICABILITY OF CHAPTER. This chapter applies only to a voluntary association that is:
(1) composed of teachers or school administrators of public or private primary or secondary schools, colleges, or universities; and
(2) incorporated under federal law or a law of this state on a nonprofit membership basis. (V.T.I.C. Art. 3.51-3 (part).)
Sec. 1578.002. AUTHORITY TO ISSUE. Notwithstanding any other law, an insurance company authorized to engage in the business of insurance in this state may issue a group policy to a voluntary association in accordance with this chapter. (V.T.I.C. Art. 3.51-3 (part).)
[Sections 1578.003-1578.050 reserved for expansion]
SUBCHAPTER B. PURCHASE OF INSURANCE
Sec. 1578.051. AUTHORITY TO OBTAIN INSURANCE. (a) A voluntary association may obtain for any class of the association's membership and for the class's dependents a group policy of:
(1) life insurance;
(2) health insurance;
(3) accident insurance;
(4) accidental death or dismemberment insurance; or
(5) hospital, surgical, or medical expense insurance.
(b) The association may obtain a separate policy for each type of insurance listed under Subsection (a).
(c) The association is the policyholder. (V.T.I.C. Art. 3.51-3 (part).)
Sec. 1578.052. PAYMENT OF PREMIUM. A voluntary association that obtains a group policy under this chapter shall pay the premium for the policy wholly or partly from money:
(1) contributed by the association; or
(2) contributed by the insured association members for that purpose. (V.T.I.C. Art. 3.51-3 (part).)
Sec. 1578.053. MINIMUM REQUIREMENTS TO OBTAIN POLICY. (a) A voluntary association may obtain a group policy under this chapter only if the policy will cover at least 25 association members on the date of issue.
(b) If the premium for the group policy is paid wholly or partly from money contributed by association members for that purpose, the policy may become effective only if at least the lesser of 75 percent of the eligible members or 400 members, excluding any member whose evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions and to be insured under the policy. (V.T.I.C. Art. 3.51-3 (part).)
Sec. 1578.054. AMOUNT OF INSURANCE. The amount of insurance under a policy issued under this chapter must be based on a plan that precludes individual selection by the voluntary association or an insured association member. (V.T.I.C. Art. 3.51-3 (part).)
[Chapters 1579-1600 reserved for expansion]
CHAPTER 1601. UNIFORM INSURANCE BENEFITS ACT
FOR EMPLOYEES OF THE UNIVERSITY OF TEXAS SYSTEM
AND THE TEXAS A&M UNIVERSITY SYSTEM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1601.001. SHORT TITLE
Sec. 1601.002. PURPOSES
Sec. 1601.003. GENERAL DEFINITIONS
Sec. 1601.004. DEFINITION OF DEPENDENT
Sec. 1601.005. DEFINITION OF CARRIER
Sec. 1601.006. APPLICABILITY OF DEFINITIONS
Sec. 1601.007. SYSTEM MAY DEFINE OTHER WORDS
Sec. 1601.008. EXEMPTION FROM EXECUTION
Sec. 1601.009. EXEMPTION FROM TAXATION AND FEES
Sec. 1601.010. CERTAIN COMBINING OF CARRIERS NOT RESTRAINT
OF TRADE
[Sections 1601.011-1601.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION AND IMPLEMENTATION
Sec. 1601.051. ADMINISTRATION AND IMPLEMENTATION
Sec. 1601.052. RULEMAKING AUTHORITY
Sec. 1601.053. GENERAL DUTIES RELATING TO COVERAGE
Sec. 1601.054. COMPETITIVE BIDDING REQUIRED
Sec. 1601.055. IDENTIFICATION OF ADMINISTRATIVE COSTS IN
BIDS
Sec. 1601.056. INFORMATION ON BIDDERS AND BIDDING CONTRACTS
Sec. 1601.057. SELECTION OF BIDS
Sec. 1601.058. SELECTION OF HEALTH MAINTENANCE ORGANIZATIONS
Sec. 1601.059. CERTIFICATE OF COVERAGE
Sec. 1601.060. ACCOUNTING BY CARRIER PROVIDING
PURCHASED COVERAGE
Sec. 1601.061. SPECIAL RESERVE
Sec. 1601.062. REPORTS AND RECORDS BY ADMINISTERING CARRIER
Sec. 1601.063. ASSISTANCE IN REQUESTING MONEY
[Sections 1601.064-1601.100 reserved for expansion]
SUBCHAPTER C. COVERAGE AND PARTICIPATION
Sec. 1601.101. PARTICIPATION ELIGIBILITY: EMPLOYEES
Sec. 1601.102. PARTICIPATION ELIGIBILITY: RETIREES
Sec. 1601.103. RIGHT TO COVERAGE
Sec. 1601.104. AUTOMATIC COVERAGE
Sec. 1601.105. WAIVER
Sec. 1601.106. OPTIONAL COVERAGE
Sec. 1601.107. COVERAGE FOR DEPENDENTS
Sec. 1601.108. COVERAGE OPTIONS FOR CERTAIN SURVIVING
SPOUSES
Sec. 1601.109. COVERAGE FOR AIDS, HIV, OR SERIOUS MENTAL
ILLNESS
[Sections 1601.110-1601.150 reserved for expansion]
SUBCHAPTER D. GROUP COVERAGES
Sec. 1601.151. AUTHORITY TO SELF-INSURE; EXEMPTION
FROM OTHER INSURANCE LAWS
Sec. 1601.152. CAFETERIA PLAN
Sec. 1601.153. SYSTEMS MAY JOIN IN PROCURING
INSURANCE
Sec. 1601.154. LONG-TERM CARE COVERAGE
Sec. 1601.155. REINSURANCE
[Sections 1601.156-1601.200 reserved for expansion]
SUBCHAPTER E. PAYMENTS, CONTRIBUTIONS, AND COSTS
Sec. 1601.201. PAYMENT FOR OPTIONAL OR BASIC COVERAGE
Sec. 1601.202. FEES FOR CAFETERIA PLAN
Sec. 1601.203. PAYMENT FOR COVERAGE FOR DEPENDENTS
Sec. 1601.204. AUTHORIZATION OF EMPLOYEE DEDUCTION
Sec. 1601.205. EMPLOYEE PAYMENTS FOR
PARTICIPATION IN CAFETERIA PLAN
Sec. 1601.206. PAYMENT BY RETIRED EMPLOYEE
Sec. 1601.207. SYSTEM CONTRIBUTIONS
Sec. 1601.208. AMOUNT OF SYSTEM CONTRIBUTION
Sec. 1601.209. ORDER OF PRECEDENCE OF PAYMENT TO SURVIVORS
Sec. 1601.210. PROVISION OF NECESSARY INFORMATION
[Sections 1601.211-1601.250 reserved for expansion]
SUBCHAPTER F. CAFETERIA PLAN FUND
Sec. 1601.251. SYSTEM CAFETERIA PLAN FUND
Sec. 1601.252. USE OF FUND
Sec. 1601.253. INVESTMENT OF MONEY IN FUND
[Sections 1601.254-1601.300 reserved for expansion]
SUBCHAPTER G. ADVISORY COMMITTEE
Sec. 1601.301. ADVISORY COMMITTEE
Sec. 1601.302. ELECTION OF MEMBERS
Sec. 1601.303. QUALIFICATIONS OF MEMBERS
Sec. 1601.304. TERMS
Sec. 1601.305. OFFICERS
Sec. 1601.306. VACANCY
Sec. 1601.307. DUTIES OF COMMITTEE
Sec. 1601.308. EXPENSES; PAYMENT BY EMPLOYEES
CHAPTER 1601. UNIFORM INSURANCE BENEFITS ACT
FOR EMPLOYEES OF THE UNIVERSITY OF TEXAS SYSTEM
AND THE TEXAS A&M UNIVERSITY SYSTEM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1601.001. SHORT TITLE. This chapter may be cited as the State University Employees Uniform Insurance Benefits Act. (V.T.I.C. Art. 3.50-3, Sec. 1.)
Sec. 1601.002. PURPOSES. The purposes of this chapter are to:
(1) provide uniformity in the basic group life, accident, and health benefit coverages for all system employees;
(2) enable the systems to attract and retain competent and able employees by providing employees with basic life, accident, and health benefit coverages comparable to those commonly provided in private industry and to employees of a state agency other than a system, including a public college or university whose employees are covered under Chapter 1551;
(3) foster, promote, and encourage employment by and service to the systems as a career profession for individuals of high standards of competence and ability;
(4) recognize and protect the investment of the systems in each employee by promoting and preserving economic security and good health among employees;
(5) foster and develop high standards of employer-employee relationships between the systems and their employees; and
(6) recognize the long and faithful service and dedication of employees and encourage them to remain in service until eligible for retirement by providing health benefits and other group benefits for them. (V.T.I.C. Art. 3.50-3, Sec. 2.)
Sec. 1601.003. GENERAL DEFINITIONS. In this chapter:
(1) "Administering carrier" means a carrier or organization that is:
(A) qualified to engage in business in this state; and
(B) designated by a system to administer services, benefits, insurance coverages, or requirements in accordance with this chapter.
(2) "Basic coverage" means coverage, including health benefit coverage, that meets the basic coverage standards required under Section 1601.053(a)(1).
(3) "Cafeteria plan" means a plan defined and authorized by Section 125, Internal Revenue Code of 1986.
(4) "Group life, accident, or health benefit plan" means a group agreement, policy, contract, or arrangement provided by an administering carrier, including:
(A) a group insurance policy or contract;
(B) a life, accident, medical, dental, or hospital service agreement;
(C) a membership or subscription contract; or
(D) any other similar group arrangement.
(5) "Optional coverage" means group coverage other than the basic coverage.
(6) "Service" means personal service to a system for which an employee is credited in accordance with rules adopted by the system.
(7) "System" means The University of Texas System or The Texas A&M University System.
(8) "The Texas A&M University System" means the entities governed under Chapters 85 through 88, Education Code, including the Texas Veterinary Diagnostic Laboratory.
(9) "The University of Texas System" means the entities listed or described by Section 65.02, Education Code.
(10) "Uniform program" means an employees uniform insurance benefits program provided under this chapter. (V.T.I.C. Art. 3.50-3, Secs. 3(a)(1), (5), (6), (7), (11), (14), (15), (17), (18), (19) (as amended Acts 76th Leg., R.S., Ch. 1057); New.)
Sec. 1601.004. DEFINITION OF DEPENDENT. (a) In this chapter, "dependent," with respect to an individual eligible to participate in the uniform program under Section 1601.101 or 1601.102, means the individual's:
(1) spouse;
(2) unmarried child younger than 25 years of age; and
(3) child of any age who lives with or has the child's care provided by the individual on a regular basis if the child is mentally retarded or physically incapacitated to the extent that the child is dependent on the individual for care or support, as determined by the system.
(b) In this section:
(1) "Child" includes:
(A) an adopted child; and
(B) a stepchild, foster child, or other child who is in a parent-child relationship with an individual who is eligible to participate in the uniform program under Section 1601.101 or 1601.102.
(2) "Spouse" has the meaning assigned by the Family Code. (V.T.I.C. Art. 3.50-3, Sec. 3(a)(8).)
Sec. 1601.005. DEFINITION OF CARRIER. In this chapter, "carrier" means:
(1) an insurance company that is authorized by the department to provide under this code any of the types of insurance coverages, benefits, or services provided for in this chapter, and that:
(A) has an adequate surplus;
(B) has a successful operating history; and
(C) has had successful experience, as determined by the department, in providing and servicing any of the types of group coverage provided for in this chapter;
(2) a corporation operating under Chapter 842 that provides any of the types of coverage, benefits, or services provided for in this chapter and that:
(A) has a successful operating history; and
(B) has had successful experience, as determined by the department, in providing and servicing any of the types of group coverage provided for in this chapter; or
(3) any combination of carriers described by Subdivisions (1) and (2) on terms the system prescribes. (V.T.I.C. Art. 3.50-3, Secs. 3(a)(3), (10) (part).)
Sec. 1601.006. APPLICABILITY OF DEFINITIONS. The definition of a term defined by this subchapter and the use of the terms "employee" and "retired employee" as described by Sections 1601.101 and 1601.102 apply to this chapter unless a different meaning is plainly required by the context in which the term appears. (V.T.I.C. Art. 3.50-3, Sec. 3(a) (part).)
Sec. 1601.007. SYSTEM MAY DEFINE OTHER WORDS. A system may define by rule a word or term necessary in the administration of this chapter. (V.T.I.C. Art. 3.50-3, Sec. 3(b).)
Sec. 1601.008. EXEMPTION FROM EXECUTION. All insurance benefits and other payments and transactions made under this chapter to a participant under this chapter are exempt from execution, attachment, garnishment, or any other process. (V.T.I.C. Art. 3.50-3, Sec. 9(a).)
Sec. 1601.009. EXEMPTION FROM TAXATION AND FEES. Premiums on a policy, an insurance contract, or an agreement established under this chapter with a health maintenance organization are not subject to any state tax, regulatory fee, or surcharge, including a premium or maintenance tax or fee. (V.T.I.C. Art. 3.50-3, Sec. 9(b).)
Sec. 1601.010. CERTAIN COMBINING OF CARRIERS NOT RESTRAINT OF TRADE. Carriers combining to bid, underwrite, or both bid and underwrite, a group life, accident, or health benefit plan for the uniform program are not in violation of Chapter 15, Business & Commerce Code. (V.T.I.C. Art. 3.50-3, Sec. 3(a)(10) (part).)
[Sections 1601.011-1601.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION AND IMPLEMENTATION
Sec. 1601.051. ADMINISTRATION AND IMPLEMENTATION. A system shall:
(1) implement a uniform program for the benefit of its employees and retired employees; and
(2) determine basic procedural and administrative practices for insurance coverage provided under this chapter. (V.T.I.C. Art. 3.50-3, Secs. 4(a) (part), (b) (part).)
Sec. 1601.052. RULEMAKING AUTHORITY. A system shall adopt rules consistent with this chapter as it considers necessary to implement this chapter and its purposes. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.053. GENERAL DUTIES RELATING TO COVERAGE. (a) A system shall:
(1) determine basic coverage standards that must be comparable to those commonly provided:
(A) in private industry; and
(B) to employees of another agency or an institution of higher education in this state under Chapter 1551; and
(2) establish procedures to allow each covered employee and retired employee to obtain prompt action regarding claims pertaining to coverages provided under this chapter.
(b) In designing a coverage plan, a system may consider existing local conditions. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.054. COMPETITIVE BIDDING REQUIRED. A system shall submit the uniform program, including any agreement under which a carrier is engaged to administer a self-insured program, for competitive bidding at least every six years. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.055. IDENTIFICATION OF ADMINISTRATIVE COSTS IN BIDS. A system shall include in its respective bid documents for the various coverages a provision calling for each bidder to identify the system's administrative costs as a distinguishable figure and to enumerate the services the bidder will render in exchange for the administrative costs. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.056. INFORMATION ON BIDDERS AND BIDDING CONTRACTS. (a) The department shall, on request by a system, provide a list of all carriers:
(1) authorized to engage in business in this state; and
(2) eligible to bid on insurance coverage provided under this chapter.
(b) The department shall, on request by a system, examine and evaluate a bidding contract and certify the contract's actuarial soundness to the system not later than the 15th day after the date of the request. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.057. SELECTION OF BIDS. (a) A system is not required to select the lowest bid under Section 1601.054 but shall take into consideration other relevant criteria, such as ability to service contracts, past experience, and financial stability.
(b) If a system selects a carrier whose bid differs from that advertised, the governing board of the system shall fully justify and record the reasons for the deviation in the minutes of the next meeting of the governing board. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.058. SELECTION OF HEALTH MAINTENANCE ORGANIZATIONS. A system shall select and contract for services performed by health maintenance organizations that are approved by this state to offer health care services in specific areas of the state to eligible employees and retired employees. (V.T.I.C. Art. 3.50-3, Sec. 4(b) (part).)
Sec. 1601.059. CERTIFICATE OF COVERAGE. A system shall ensure that each employee and retired employee participating under this chapter is issued a certificate of coverage that states:
(1) the benefits to which the participant is entitled;
(2) to whom the benefits are payable;
(3) to whom a claim must be submitted; and
(4) the provisions of the plan document, in summary form, that principally affect the participant. (V.T.I.C. Art. 3.50-3, Sec. 5.)
Sec. 1601.060. ACCOUNTING BY CARRIER PROVIDING PURCHASED COVERAGE. (a) A carrier providing coverage purchased under this chapter to a system shall provide an accounting for each line of coverage to the system not later than the 120th day after the end of each plan year.
(b) The accounting must be in a form acceptable to the system.
(c) The accounting for each line of coverage must state:
(1) the cumulative amount of contributions remitted to the carrier under the coverage;
(2) the total of all mortality and other claims, charges, losses, costs, contingency reserve for pending and unreported claims, and expenses incurred; and
(3) the amounts of the allowance for a reasonable profit, contingency reserve, and all other administrative charges.
(d) Information provided under Subsection (c) must be provided:
(1) for the period from the coverage's date of issue to the end of the plan year; and
(2) for the plan year covered by the report. (V.T.I.C. Art. 3.50-3, Sec. 8(a).)
Sec. 1601.061. SPECIAL RESERVE. (a) A carrier issuing a group coverage plan under this chapter may hold as a special reserve for a system an amount that equals the amount by which the total amount described by Section 1601.060(c)(1) exceeds the sum of the corresponding amounts described by Sections 1601.060(c)(2) and (3).
(b) The system may use money in the special reserve at its discretion, including for:
(1) providing additional coverage for participating employees or retired employees;
(2) offsetting necessary rate increases; or
(3) reducing contributions to the coverage by participating employees or retired employees.
(c) A special reserve held by a carrier for a system earns interest at a rate determined each plan year by the carrier and approved by the system as consistent with the rate generally used by the carrier for similar funds held under other group coverages. (V.T.I.C. Art. 3.50-3, Sec. 8(b).)
Sec. 1601.062. REPORTS AND RECORDS BY ADMINISTERING CARRIER. Each contract entered into under this chapter between a system and an administering carrier must:
(1) require the administering carrier to provide reasonable reports that the system determines are necessary for the system to perform its functions under this chapter; and
(2) permit the system and representatives of the state auditor to examine records of the administering carrier as necessary to accomplish the purposes of this chapter. (V.T.I.C. Art. 3.50-3, Sec. 15.)
Sec. 1601.063. ASSISTANCE IN REQUESTING MONEY. The Legislative Budget Board and the Governor's Budget and Planning Office shall:
(1) establish procedures to ensure that each system requests appropriate money to support its uniform program; and
(2) present appropriate budget recommendations to the legislature. (V.T.I.C. Art. 3.50-3, Sec. 13 (part).)
[Sections 1601.064-1601.100 reserved for expansion]
SUBCHAPTER C. COVERAGE AND PARTICIPATION
Sec. 1601.101. PARTICIPATION ELIGIBILITY: EMPLOYEES. (a) An individual who is employed by the governing board of a system, who performs service, other than as an independent contractor, for the system, and who is described by this section is eligible to participate as an employee in the uniform program.
(b) An individual is eligible to participate in the uniform program as provided by Subsection (a) if the individual receives compensation for services performed for the system, is eligible to be a member of the Teacher Retirement System of Texas, and either:
(1) is expected to work at least 20 hours per week and to continue in the employment for a term of at least 4-1/2 months; or
(2) is appointed for at least 50 percent of a standard full-time appointment.
(c) An individual is eligible to participate in the uniform program as provided by Subsection (a) if the individual:
(1) receives compensation for services performed for the system;
(2) is employed at least 20 hours a week only; and
(3) is not permitted to be a member of the Teacher Retirement System of Texas because the individual is solely employed by the system in a position that as a condition of employment requires the individual to be enrolled as a student in the system in graduate-level courses. (V.T.I.C. Art. 3.50-3, Sec. 3(a)(4).)
Sec. 1601.102. PARTICIPATION ELIGIBILITY: RETIREES. (a) An individual who retires in a manner described by this section is eligible to participate as a retired employee in the uniform program.
(b) An individual is eligible to participate in the uniform program as provided by Subsection (a) if:
(1) the individual has at least three years of service with a system for which the individual was eligible to participate in the uniform program under Section 1601.101;
(2) the individual's last state employment before retirement was with that system; and
(3) the individual retires under the jurisdiction of:
(A) the Teachers Retirement System of Texas under Subtitle C, Title 8, Government Code;
(B) the Employees Retirement System of Texas; or
(C) subject to Subsection (c):
(i) the optional retirement program established by Chapter 830, Government Code; or
(ii) any other federal or state statutory retirement program to which the system has made employer contributions.
(c) An individual retiring in the manner described by Subsection (b)(3)(C) is a retired employee only if the individual meets all applicable requirements for retirement, including service and age requirements, adopted by the system comparable to the requirements for retirement under the Teachers Retirement System of Texas.
(d) An individual is eligible to participate in the uniform program as provided by Subsection (a) if the individual:
(1) meets the minimum requirements under Subsection (b) except that the last state employment before retirement is not at the employing system; and
(2) does not meet the requirements for an annuitant under Section 1551.102.
(e) An individual is eligible to participate in the uniform program as provided by Subsection (a) if the individual retired under Subtitle C, Title 8, Government Code, before September 1, 1991, with at least five and less than 10 years of service. (V.T.I.C. Art. 3.50-3, Secs. 3(a)(2), (c).)
Sec. 1601.103. RIGHT TO COVERAGE. An individual eligible to participate in the uniform program under Section 1601.101 or 1601.102 may not be denied enrollment in any coverage provided under this chapter. (V.T.I.C. Art. 3.50-3, Sec. 11(a) (part).)
Sec. 1601.104. AUTOMATIC COVERAGE. (a) A system shall automatically provide the basic coverage to each full-time employee unless the employee has:
(1) waived participation in the basic coverage; or
(2) selected an optional coverage plan.
(b) An employee or retired employee who is automatically covered under this section may subsequently:
(1) retain the basic coverage or waive participation in the basic coverage; and
(2) apply for any other coverage provided under this chapter within applicable standards.
(c) Automatic coverage as described under this section begins on the first date of employment. (V.T.I.C. Art. 3.50-3, Secs. 11(b) (part), (c).)
Sec. 1601.105. WAIVER. An employee or retired employee may waive in writing any coverage provided under this chapter. (V.T.I.C. Art. 3.50-3, Sec. 11(a) (part).)
Sec. 1601.106. OPTIONAL COVERAGE. A system shall provide optional coverage in accordance with Section 1601.201. (V.T.I.C. Art. 3.50-3, Sec. 11(b) (part).)
Sec. 1601.107. COVERAGE FOR DEPENDENTS. An individual who is eligible to participate in the uniform program under Section 1601.101 or 1601.102 is entitled to secure for a dependent of the individual any group coverages provided under this chapter for dependents under rules adopted by the applicable system. (V.T.I.C. Art. 3.50-3, Sec. 17(a) (part).)
Sec. 1601.108. COVERAGE OPTIONS FOR CERTAIN SURVIVING SPOUSES. (a) This section applies only to the surviving spouse of:
(1) an individual eligible to participate in the uniform program under Section 1601.101 who had at least five years of service on the date of the individual's death, including at least three years of service as an eligible employee with the employing system; or
(2) an individual eligible to participate in the uniform program under Section 1601.102.
(b) A surviving spouse to whom this section applies may elect to retain any of the following coverages in effect on the date of the participant's death:
(1) the surviving spouse's authorized coverages; and
(2) authorized coverages for any eligible dependent of the deceased participant.
(c) The coverage is at the group rate for other participants. (V.T.I.C. Art. 3.50-3, Sec. 17(b).)
Sec. 1601.109. COVERAGE FOR AIDS, HIV, OR SERIOUS MENTAL ILLNESS. (a) In this section, "serious mental illness" has the meaning assigned by Section 1, Article 3.51-14.
(b) A system may not contract for or provide for group insurance or HMO coverage or provide self-insured coverage, that:
(1) excludes or limits coverage or services for acquired immune deficiency syndrome, as defined by the Centers for Disease Control and Prevention of the United States Public Health Service, or human immunodeficiency virus infection; or
(2) provides coverage for serious mental illness that is less extensive than the coverage provided for any other physical illness. (V.T.I.C. Art. 3.50-3, Secs. 3(a)(16); 3(a)(19), as amended Acts 76th Leg., R.S., Ch. 944; 4C.)
[Sections 1601.110-1601.150 reserved for expansion]
SUBCHAPTER D. GROUP COVERAGES
Sec. 1601.151. AUTHORITY TO SELF-INSURE; EXEMPTION FROM OTHER INSURANCE LAWS. (a) Notwithstanding any other provisions of this chapter, the governing board of a system may:
(1) self-insure a plan provided under this chapter; and
(2) hire a carrier to administer the system's uniform program.
(b) A plan for which a system provides coverage on a self-insured basis is exempt from any other insurance law of this state that does not expressly apply to that plan or this chapter.
(c) Expenses for the administration of a self-insured plan may come from the contributions of employees and the state after payments for any coverage provided under this chapter have been made. (V.T.I.C. Art. 3.50-3, Secs. 4(d), 14 (part).)
Sec. 1601.152. CAFETERIA PLAN. (a) The governing board of a system may develop, implement, and administer a cafeteria plan.
(b) The governing board may include in the cafeteria plan any benefit that may be included in a cafeteria plan under federal law.
(c) The governing board may cooperate and work with and enter into a necessary contract or agreement with an independent and qualified agency, person, or entity to:
(1) develop, implement, or administer a cafeteria plan; or
(2) assist in those activities.
(d) The governing board may adopt an order terminating the cafeteria plan and providing a procedure for the orderly withdrawal of the system and its employees from the cafeteria plan if the governing board determines that a cafeteria plan adopted under this section is no longer advantageous to the system and its employees. (V.T.I.C. Art. 3.50-3, Sec. 4(e).)
Sec. 1601.153. SYSTEMS MAY JOIN IN PROCURING INSURANCE. The systems may join together to procure one or more group contracts with an insurance company authorized to engage in business in this state to insure the employees and retired employees of each participating system. (V.T.I.C. Art. 3.50-3, Sec. 4(f) (part).)
Sec. 1601.154. LONG-TERM CARE COVERAGE. (a) A system may join with a board of trustees that administers the uniform program established under Chapter 1551 or the group program established under Chapter 1575 to provide long-term care insurance coverage.
(b) Each participating board of trustees and the governing board of the system must mutually agree to join together for this purpose, subject to terms that are beneficial to all participants.
(c) A system may not participate in an agreement under this section unless any cost or administrative burden associated with the development or implementation of or communications about the long-term care coverage plan is incidental. (V.T.I.C. Art. 3.50-3, Sec. 4(g).)
Sec. 1601.155. REINSURANCE. A system may arrange with an administering carrier issuing a policy under this chapter for the reinsurance of portions of the total amount of insurance under the policy with other carriers that elect to participate in the reinsurance. (V.T.I.C. Art. 3.50-3, Sec. 7.)
[Sections 1601.156-1601.200 reserved for expansion]
SUBCHAPTER E. PAYMENTS, CONTRIBUTIONS, AND COSTS
Sec. 1601.201. PAYMENT FOR OPTIONAL OR BASIC COVERAGE. (a) A system shall provide optional coverage at no cost to an employee or retired employee if the cost of the employee's or retired employee's basic coverage exceeds the amount appropriated by the legislature for an employee or retired employee. For a participant who chooses the basic coverage rather than optional coverages, a system may:
(1) for an individual eligible to participate in the uniform program under Section 1601.101, deduct from or reduce the monthly compensation of the participant; or
(2) for an individual eligible to participate in the uniform program under Section 1601.102, require appropriate payment.
(b) The deduction or reduction under Subsection (a) may not exceed one-half of the amount that exceeds the state's contribution, and the system shall pay any difference. (V.T.I.C. Art. 3.50-3, Sec. 11(b) (part).)
Sec. 1601.202. FEES FOR CAFETERIA PLAN. (a) The governing board of a system may establish a monthly fee in an amount set by the board to be paid by each employee who elects to participate in a cafeteria plan for the purpose of paying the expenses of administering the cafeteria plan.
(b) If the governing board establishes a monthly fee, each employee who participates in the cafeteria plan must authorize payment of the fee by executing a separate payroll deduction agreement or as part of a salary reduction agreement, as determined by the governing board. (V.T.I.C. Art. 3.50-3, Sec. 14B(b) (part).)
Sec. 1601.203. PAYMENT FOR COVERAGE FOR DEPENDENTS. Contributions for coverages for a dependent of an individual eligible to participate in the uniform program under Section 1601.101 or 1601.102 required of the participant that exceed the amount of system contributions shall be paid:
(1) by a deduction from the monthly compensation of the participant;
(2) by a reduction of the monthly compensation of the participant in the appropriate amount; or
(3) in the form and manner the system determines. (V.T.I.C. Art. 3.50-3, Sec. 17(a) (part).)
Sec. 1601.204. AUTHORIZATION OF EMPLOYEE DEDUCTION. (a) Except for a participant who participates in a cafeteria plan, each individual eligible to participate in the uniform program under Section 1601.101 must authorize a deduction from the participant's monthly compensation in an amount equal to the difference between:
(1) the total cost for coverages for which the participant applies; and
(2) the amount contributed by the system.
(b) The authorization must be:
(1) in writing or performed electronically; and
(2) in a form satisfactory to the system. (V.T.I.C. Art. 3.50-3, Sec. 12(b) (part).)
Sec. 1601.205. EMPLOYEE PAYMENTS FOR PARTICIPATION IN CAFETERIA PLAN. (a) If an employee elects to participate in a cafeteria plan, the employee must execute a salary reduction agreement under which the employee's monthly compensation will be reduced in an amount equal to the difference between:
(1) the amount appropriated for that purpose in the General Appropriations Act or the system's budget; and
(2) the cost of the employee's selected coverages for which the employee is eligible to pay under the cafeteria plan.
(b) The employee must execute a salary reduction agreement for any portion of the cost that is not covered by state or system appropriations and cafeteria plan contributions. (V.T.I.C. Art. 3.50-3, Sec. 12(b) (part).)
Sec. 1601.206. PAYMENT BY RETIRED EMPLOYEE. An individual eligible to participate in the uniform program under Section 1601.102 must execute an agreement and make appropriate contributions in a manner analogous to the requirements adopted under Sections 1601.204 and 1601.205 for an individual eligible to participate in the uniform program under Section 1601.101. (V.T.I.C. Art. 3.50-3, Sec. 12(c).)
Sec. 1601.207. SYSTEM CONTRIBUTIONS. A system shall contribute monthly to the cost of each participant's coverage provided under this chapter an amount:
(1) if the participants are compensated from amounts appropriated in the General Appropriations Act, equal to or greater than the amount appropriated for that purpose in the Act; or
(2) if the participants are compensated from amounts appropriated by the governing board of the system in its official operating budget, an amount equal to the amount appropriated for a participant under the General Appropriations Act. (V.T.I.C. Art. 3.50-3, Sec. 12(a).)
Sec. 1601.208. AMOUNT OF SYSTEM CONTRIBUTION. Not later than November 1 preceding each regular session of the legislature, each system shall certify to the Legislative Budget Board and the budget division of the Governor's Budget and Planning Office the amount necessary to pay the contributions of the system for the coverages provided under this chapter to each employee and retired employee of the system. (V.T.I.C. Art. 3.50-3, Sec. 13 (part).)
Sec. 1601.209. ORDER OF PRECEDENCE OF PAYMENT TO SURVIVORS. (a) The amount of group life coverages and group accidental death and dismemberment coverages in force for a participant on the date the participant dies shall be paid, on the establishment of a valid claim, to a person surviving the death in the following order of precedence:
(1) to the beneficiary designated by the participant in a signed and witnessed writing received before death by the appropriate office of the applicable system; or
(2) if a beneficiary is not designated under Subdivision (1), in accordance with the death benefit provisions of Subtitle C, Title 8, Government Code.
(b) For purposes of Subsection (a)(1), a designation, change, or cancellation of a beneficiary in a document, including a will, that is not executed and filed in the manner described by that subsection is not valid. (V.T.I.C. Art. 3.50-3, Sec. 10.)
Sec. 1601.210. PROVISION OF NECESSARY INFORMATION. The Teacher Retirement System of Texas, Optional Retirement Program carriers, and Employees Retirement System of Texas shall provide to each system information the system considers necessary to provide retired employees with the coverages and system contributions provided under this chapter. (V.T.I.C. Art. 3.50-3, Sec. 13 (part).)
[Sections 1601.211-1601.250 reserved for expansion]
SUBCHAPTER F. CAFETERIA PLAN FUND
Sec. 1601.251. SYSTEM CAFETERIA PLAN FUND. (a) The governing board of each system may establish and administer a cafeteria plan fund.
(b) The following shall be credited to the cafeteria plan fund of a system:
(1) salary reduction payments for benefits included in a cafeteria plan adopted under this chapter, other than group coverage plans under the uniform program;
(2) appropriations by the state for the administration of a cafeteria plan; and
(3) a monthly fee established under Section 1601.202. (V.T.I.C. Art. 3.50-3, Secs. 14B(a) (part), (b) (part).)
Sec. 1601.252. USE OF FUND. The cafeteria plan fund of a system is available without fiscal year limitation:
(1) for all payments for any benefits included in a cafeteria plan adopted by the system under this chapter other than group coverage plans under the uniform program; and
(2) for payment of expenses of administering the cafeteria plan. (V.T.I.C. Art. 3.50-3, Sec. 14B(a) (part).)
Sec. 1601.253. INVESTMENT OF MONEY IN FUND. (a) The governing board of a system may invest the money in the system's cafeteria plan fund.
(b) The earnings, including interest, and the proceeds from the sale of the investments become a part of the fund. (V.T.I.C. Art. 3.50-3, Sec. 14B(c).)
[Sections 1601.254-1601.300 reserved for expansion]
SUBCHAPTER G. ADVISORY COMMITTEE
Sec. 1601.301. ADVISORY COMMITTEE. An advisory committee for each system shall be selected, serve, and perform duties as provided by this subchapter. (V.T.I.C. Art. 3.50-3, Sec. 4(c) (part).)
Sec. 1601.302. ELECTION OF MEMBERS. One member of the advisory committee shall be elected from each of the components, units, or agencies of the system:
(1) at times designated by the system; and
(2) in accordance with general guidelines for the election provided by the system. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(1).)
Sec. 1601.303. QUALIFICATIONS OF MEMBERS. (a) A member of a system's advisory committee must be an employee of the system.
(b) A member must:
(1) demonstrate mature judgment, special abilities, and sincere interest in employee coverage plans; and
(2) be able to represent the needs of all employees of the component, unit, or agency the member represents with respect to an action of the advisory committee. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(2).)
Sec. 1601.304. TERMS. A member of the advisory committee is elected for a two-year term. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(3) (part).)
Sec. 1601.305. OFFICERS. Annually, the members of a system's advisory committee shall elect a presiding officer and other necessary officers. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(3) (part).)
Sec. 1601.306. VACANCY. The chief executive officer of a component, unit, or agency of a system shall appoint to the system's advisory committee an employee of the component, unit, or agency to fill the remainder of a vacated term of a member who is an employee of the component, unit, or agency. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(3) (part).)
Sec. 1601.307. DUTIES OF COMMITTEE. (a) The advisory committee of a system shall cooperate and work with the governing board of the system in coordinating and correlating the administration of the uniform program among the various components, units, and agencies of the system.
(b) Members of the advisory committee shall cooperate and work with the governing board of the system as advisors in the development, implementation, coordination, and administration of the uniform program among the various components, units, and agencies of the system.
(c) The advisory committee shall provide a channel for open communication of ideas and suggestions regarding coverages, eligibility, claims, procedures, bidding, administration, and any other aspect of employee plan benefits. (V.T.I.C. Art. 3.50-3, Sec. 4(c)(4).)
Sec. 1601.308. EXPENSES; PAYMENT BY EMPLOYEES. (a) A member's service on the advisory committee of a system is in addition to the duties of the member's state office or employment.
(b) An expense incurred by an advisory committee member in performing a duty as a member of the committee shall be paid from money made available for that purpose to the system of which the member is an employee or officer.
(c) Employees shall pay the expenses of an advisory committee established under this subchapter from:
(1) the amount of employer contributions due the employees; or
(2) the amount of additional contributions due for selected coverages under this chapter. (V.T.I.C. Art. 3.50-3, Sec. 14 (part).)
[Chapters 1602-1624 reserved for expansion]
CHAPTER 1625. TRANSFER BETWEEN CERTAIN GOVERNMENTAL
PROGRAMS
Sec. 1625.001. DEFINITIONS
Sec. 1625.002. INAPPLICABILITY OF PREEXISTING
CONDITIONS REQUIREMENT
Sec. 1625.003. RULES
Sec. 1625.004. MEMORANDUM OF UNDERSTANDING
Sec. 1625.005. UNIFORM PROCEDURES
CHAPTER 1625. TRANSFER BETWEEN CERTAIN GOVERNMENTAL
PROGRAMS
Sec. 1625.001. DEFINITIONS. In this chapter:
(1) "Board of trustees" has the meaning assigned by Section 1551.003.
(2) "Institution of higher education" means a senior college or university, medical or dental unit, technical institute, or agency of higher education under the policy direction of a single governing board. The term does not include a public junior college. (V.T.I.C. Art. 3.50-5, Subsecs. (a)(2), (3).)
Sec. 1625.002. INAPPLICABILITY OF PREEXISTING CONDITIONS REQUIREMENT. A person, including a covered dependent, who obtains insurance, benefits, or any type of health care services coverage under Chapter 1551 or 1601 may transfer from an institution of higher education or other state agency to which either law applies to another institution of higher education or state agency to which either law applies without being required to comply with any preexisting conditions requirement. (V.T.I.C. Art. 3.50-5, Subsecs. (b), (c).)
Sec. 1625.003. RULES. The board of trustees or the governing board of an institution of higher education may adopt rules necessary to implement this chapter. (V.T.I.C. Art. 3.50-5, Subsec. (d).)
Sec. 1625.004. MEMORANDUM OF UNDERSTANDING. The board of trustees and the governing boards of institutions of higher education may enter into memoranda of understanding with one another to implement this chapter. (V.T.I.C. Art. 3.50-5, Subsec. (e).)
Sec. 1625.005. UNIFORM PROCEDURES. The governing board of an institution of higher education and the board of trustees may:
(1) adopt uniform procedures to implement a transfer under this chapter; and
(2) impose conditions necessary to ensure the efficient operation of the programs over which each has jurisdiction. (V.T.I.C. Art. 3.50-5, Subsec. (f).)
SECTION . CONFORMING AMENDMENT. Article 1.10, Insurance Code, is amended to read as follows:
Art. 1.10. CERTAIN DUTIES OF THE DEPARTMENT. In addition to the other duties required of the department, the department shall perform duties as follows:
2. File Articles of Incorporation and Other Papers. File and preserve in its office all acts or articles of incorporation of insurance companies and all other papers required by law to be deposited with the Department and, upon application of any party interested therein, furnish certified copies thereof upon payment of the fees prescribed by law.
3. Shall Calculate Reserve. For every company transacting any kind of insurance business in this State, for which no basis is prescribed by law, the Department shall calculate the reinsurance reserve upon the same basis prescribed in Section 862.102 [Article 6.01] of this code as to companies transacting fire insurance business.
4. To Calculate Re-insurance Reserve. On the thirty-first day of December of each and every year, or as soon thereafter as may be practicable, the Department shall have calculated in the Department the re-insurance reserve for all unexpired risks of all insurance companies organized under the laws of this state, or transacting business in this state, transacting any kind of insurance other than life, fire, marine, inland, lightning or tornado insurance, which calculation shall be in accordance with the provisions of Paragraph 3 hereof.
5. When a Company's Surplus is Impaired. No impairment of the capital stock of a stock company shall be permitted. No impairment of the surplus of a stock company, or of the minimum required aggregate surplus of a mutual, Lloyd's, or reciprocal insurer, shall be permitted in excess of that provided by this section. Having charged against a company other than a life insurance company, the reinsurance reserve, as prescribed by the laws of this State, and adding thereto all other debts and claims against the company, the Commissioner shall, (i) if it is determined that the surplus required by Section 822.054, 822.202, 822.203, 822.205, 822.210, 822.211, or 822.212 [Article 2.02 or 2.20] of this code of a stock company doing the kind or kinds of insurance business set out in its Certificate of Authority is impaired to the extent of more than fifty (50%) per cent of the required surplus for a capital stock insurance company, or is less than the minimum level of surplus required by Commissioner promulgated risk-based capital and surplus regulations, or (ii) if it is determined that the required aggregate surplus of a reciprocal or mutual company, or the required aggregate of guaranty fund and surplus of a Lloyd's company, other than a life insurance company, doing the kind or kinds of insurance business set out in its Certificate of Authority is impaired to the extent of more than twenty-five per cent (25%) of the required aggregate surplus, or is less than the minimum level of surplus required by Commissioner promulgated risk-based capital and surplus regulations, the Commissioner shall order the company to remedy the impairment of surplus to acceptable levels specified by the Commissioner or to cease to do business within this State. The Commissioner shall thereupon immediately institute such proceedings as may be necessary to determine what further actions shall be taken in the case.
6. Shall Publish Results of Investigation. The Department shall publish the result of an examination of the affairs of any company whenever the Commissioner deems it for the interest of the public.
[15. See That No Company Does Business. The Commissioner shall see that no company is permitted to transact the business of life insurance in this State whose charter authorizes it to do a fire, marine, lightning, tornado, or inland insurance business, and that no company authorized to do a life insurance business in this State be permitted to take fire, marine or inland risks.
[16. Admit Mutual Companies. The Commissioner shall admit into this State mutual insurance companies engaged in cyclone, tornado, hail and storm insurance which are organized under the laws of other states and which have Two Million ($2,000,000.00) Dollars assets in excess of liabilities.]
17. Voluntary Deposits. (a) In the event any insurance company organized and doing business under the provisions of this Code shall be required by any other state, country or province as a requirement for permission to do an insurance business therein to make or maintain a deposit with an officer of any state, country, or province, such company, at its discretion, may voluntarily deposit with the Comptroller such securities as may be approved by the Commissioner of Insurance to be of the type and character authorized by law to be legal investments for such company, or cash, in any amount sufficient to enable it to meet such requirements. The Comptroller is hereby authorized and directed to receive such deposit and hold it exclusively for the protection of all policyholders or creditors of the company wherever they may be located, or for the protection of the policyholders or creditors of a particular state, country or province, as may be designated by such company at the time of making such deposit. The company may, at its option, withdraw such deposit or any part thereof, first having deposited with the Comptroller, in lieu thereof, other securities of like class and of equal amount and value to those withdrawn, which withdrawal and substitution must be approved by the Commissioner of Insurance. The proper officer of each insurance company making such deposit shall be permitted at all reasonable times to examine such securities and to detach coupons therefrom, and to collect interest thereon, under such reasonable rules and regulations as may be prescribed by the Comptroller and the Commissioner of Insurance. Any deposit so made for the protection of policyholders or creditors of a particular state, country or province shall not be withdrawn, except by substitution as provided above, by the company, except upon filing with the Commissioner of Insurance evidence satisfactory to him that the company has withdrawn from business, and has no unsecured liabilities outstanding or potential policyholder liabilities or obligations in such other state, country or province requiring such deposit, and upon the filing of such evidence the company may withdraw such deposit at any time upon the approval of the Commissioner of Insurance. Any deposit so made for the protection of all policyholders or creditors wherever they may be located shall not be withdrawn, except by substitution as provided above, by the company except upon filing with the Commissioner of Insurance evidence satisfactory to him that the company does not have any unsecured liabilities outstanding or potential policy liabilities or obligations anywhere, and upon filing such evidence the company may withdraw such deposit upon the approval of the Commissioner of Insurance. For the purpose of state, county and municipal taxation, the situs of any securities deposited with the Comptroller hereunder shall be in the city and county where the principal business office of such company is fixed by its charter.
(b) Any voluntary deposit held by the Comptroller or the Department heretofore made by any insurance company in this State, and which deposit was made for the purpose of gaining admission to another state, may be considered, at the option of such company, to be hereinafter held under the provisions of this Act.
(c) When two or more companies merge or consolidate or enter a total reinsurance contract by which the ceding company is dissolved and its assets acquired and liabilities assumed by the surviving company, and the companies have on deposit with the Comptroller two or more deposits made for identical purposes under this section or Article 4739, Revised Statutes, as amended, and now repealed, all such deposits, except the deposit of greatest amount and value, may be withdrawn by the new surviving or reinsuring company, upon proper showing of duplication of such deposits and that the company is the owner thereof.
(d) Any company which has made a deposit or deposits under this section or Article 4739, Revised Statutes, as amended and now repealed, shall be entitled to a return of such deposits upon proper application therefor and a showing before the Commissioner that such deposit or deposits are no longer required under the laws of any state, country or province in which such company sought or gained admission to do business upon the strength of a certificate of such deposit.
(e) Upon being furnished a certified copy of the Commissioner's order issued under Subsection (c) or (d) above, the Comptroller shall release, transfer and deliver such deposit or deposits to the owner as directed in said order.
18. Complaint File. The Department shall keep an information file about each complaint filed with the Department concerning an activity that is regulated by the Department or Commissioner.
19. Notice of Complaint Status. If a written complaint is filed with the Department, the Department, at least quarterly and until final disposition of the complaint, shall notify the parties to the complaint of the status of the complaint unless the notice would jeopardize an undercover investigation.
20. Electronic Transfer of Funds. The Commissioner shall adopt rules for the electronic transfer of any taxes, fees, guarantee funds, or other money owed to or held for the benefit of the state and for which the Department has the responsibility to administer under this code or another insurance law of this state. The Commissioner shall require the electronic transfer of any amounts held or owed in an amount exceeding $500,000.
SECTION . CONFORMING AMENDMENT. Article 1.10C, Insurance Code, is amended to read as follows:
Art. 1.10C. ACCESS TO CERTAIN CRIMINAL HISTORY RECORD INFORMATION. [(e)] The department may deny a license to an applicant for any license, permit, [certificate of authority, certificate of registration,] or other authorization issued by the board to engage in an activity regulated under this code who fails to provide a complete set of fingerprints on request and may deny a certificate of authority to an insurance company whose corporate officers fail to provide complete sets of fingerprints on request.
SECTION . CONFORMING AMENDMENT. Article 1.11, Insurance Code, is amended to read as follows:
Art. 1.11. FILING OR DEPOSIT OF CERTAIN DOCUMENTS OR PAYMENTS WITH DEPARTMENT [MAY CHANGE FORM OF ANNUAL STATEMENT]. [(a) The commissioner may, from time to time, make such changes in the forms of the annual statements required of insurance companies of any kind, as shall seem to it best adapted to elicit a true exhibit of their condition and methods of transacting business. Such form shall elicit only such information as shall pertain to the business of the company.]
If any [annual statement,] report, financial statement, or payment required to be filed or deposited in the offices of the commissioner, or any report, tax return, or payment required to be filed or deposited in the offices of the comptroller, is delivered by the United States Postal Service to the offices of the commissioner or comptroller, as required, after the prescribed date on which the [annual statement,] report, financial statement, tax return, or payment is to be filed, the date of the United States Postal Service postmark stamped on the cover in which the document is mailed, or any other evidence of mailing authorized by the United States Postal Service reflected on the cover in which the document is mailed, shall be deemed to be the date of filing, unless otherwise specifically made an exception to this general statute.
[(b) Each domestic, foreign, and alien insurer authorized to transact insurance in this state, at the time it files its annual statement with the State Board of Insurance, shall file with the National Association of Insurance Commissioners a copy of its annual statement, along with any changes in substance and form, including a requirement that the submission be in computer compatible format, or additional filings, if any, as may be prescribed by the State Board of Insurance. The information filed shall include the signed jurat page and the actuarial certification, as required by the state of domicile. Any amendments and additions to the annual statement subsequently filed with the State Board of Insurance also shall be filed with the National Association of Insurance Commissioners. The expense for preparing and furnishing such annual statement and other filings to the National Association of Insurance Commissioners shall be that of the insurer. There shall be no other costs or expenses of any kind levied, charged, or assessed against the insurer relating to such filings. The Board may deem foreign insurers that are domiciled in a state that has a law substantially similar to this section to be in compliance with this section. This section is applicable to all companies regulated by the State Board of Insurance including domestic and foreign, stock and mutual life, health, and accident insurance companies; domestic and foreign, stock and mutual, fire and casualty insurance companies; Mexican casualty companies; domestic and foreign Lloyd's plan insurers; domestic and foreign reciprocal or interinsurance exchanges; domestic and foreign fraternal benefit societies; domestic and foreign title insurance companies; attorney's title insurance companies; stipulated premium insurance companies; nonprofit legal service corporations; health maintenance organizations; statewide mutual assessment companies; local mutual aid associations; local mutual burial associations; exempt associations under Article 14.17 of this code; nonprofit hospital, medical, or dental service corporations including companies subject to Chapter 20 of this code; county mutual insurance companies; and farm mutual insurance companies. The Board may exempt any class of insurers from the requirements of this section if the Board believes the information required by this section will not be useful for regulatory purposes. Reports or other information communicated to the State Board of Insurance by the National Association of Insurance Commissioners from the collection, review, analysis, and dissemination of information developed from the filing of annual statement convention blanks is considered part of the process of examination of insurance companies under Articles 1.15-1.19 of this code and other provisions of this code, and this information is an integral part of those examinations.
[(c) Included on or attached to page 1 of the annual statement shall be the statement of a qualified actuary, entitled "Statement of Actuarial Opinion," setting forth his or her opinion relating to policy reserves and other actuarial items for life, accident and health, and annuities, or loss and loss adjustment expense reserves for property and casualty risks, as described in the NAIC annual statement instructions as appropriate for the type of risks insured.
[(d) In this article, "qualified actuary" means a member in good standing of the American Academy of Actuaries or a person who has otherwise demonstrated actuarial competence to the satisfaction of the commissioner of insurance or other insurance regulatory official of the insurer's domiciliary state.]
SECTION . CONFORMING AMENDMENT. The heading to Article 1.14-2, Insurance Code, is amended to read as follows:
Art. 1.14-2. SURPLUS LINES INSURANCE PREMIUM TAX
SECTION . CONFORMING AMENDMENT. Section 12, Article 1.14-2, Insurance Code, is amended by adding Subsection (e) to read as follows:
(e) The provisions of Chapter 981 of this code, including provisions relating to the applicability and enforcement of that chapter, rulemaking authority under that chapter, and definitions of terms applicable in that chapter, apply to this section.
SECTION . CONFORMING AMENDMENT. Article 3.11, Insurance Code, is amended to read as follows:
Art. 3.11. CERTAIN GUARANTEES IN LIFE INSURANCE POLICIES [DIVIDENDS; HOW PAID]. Section 841.253 of this code does [No life insurance company shall declare or pay any dividends to its policyholders, except from the expense loading and profits made by such company; provided, however, any such company not showing a profit may pay dividends on its participating policies from the expense loading on such policies; and provided further, that any payment of dividends from the expense loading shall not be discriminatory as between policyholders. This shall] not prohibit the issuance of life insurance policies guaranteeing, by coupons or otherwise, definite payments or reductions in premiums, but any such guarantee contained in policies or coupons issued after the effective date of this Act shall be treated as a definite contract benefit and so valued according to the reserve requirements of this Chapter using in the case of policies or coupons issued before the date determined under Section 1105.002(a) or (b) of this code, as applicable to the company, [prior to the operative date of Article 3.44a (the Standard Non-forfeiture Law)] reserve valuation net premium for such benefits which is a uniform percentage of the gross premiums, provided that any policy containing such a contract benefit may be valued on a basis which provides for not more than one (1) year preliminary term insurance, and using in the case of policies or coupons issued on or after the date determined under Section 1105.002(a) or (b) of this code, as applicable to the company, [operative date of Article 3.44a] the commissioners reserve valuation method as defined in Article 3.28. [No such company shall declare or pay any dividends to its stockholders, except from the company's earned surplus as defined by the State Board of Insurance.] Nothing in this Section with respect to reserves shall apply to any policy issued prior to September 7, 1955.
SECTION . CONFORMING AMENDMENT. Article 3.51-8, Insurance Code, is amended to read as follows:
Art. 3.51-8. CONTINUATION OF [GROUP LIFE AND] GROUP ACCIDENT AND HEALTH INSURANCE DURING LABOR DISPUTE. No [group life insurance policy or] group accident and health insurance policy shall be delivered or issued for delivery in this state where the premiums or any part thereof is paid or is to be paid in whole or in part by an employer pursuant to the terms of a collective bargaining agreement unless the policy provides that in the event of a cessation of work by the employees covered by the policy as the result of a labor dispute, the policy upon timely payment of the premium shall continue in effect with respect to all employees insured by the policy on the date of the cessation of work who continue to pay their individual contribution and who assume and pay the contribution due from the employer for the period of cessation of work, under the following conditions:
(a) If the policyholder is not a trustee or the trustees of a fund established or maintained in whole or in part by the employer, the policy shall provide that the employee's individual contribution shall be the rate in the policy, on the date cessation of work occurs, applicable to an individual in the class to which the employee belongs as set forth in the policy. If the policy does not provide for a rate applicable to individuals, the policy shall provide that the employee's individual contribution shall be an amount equal to the amount determined by dividing (1) the total monthly premium in effect under the policy at the date of cessation of work by (2) the total number of persons insured under the policy at such date.
(b) If the policyholder is a trustee or the trustees of a fund established or maintained in whole or in part by the employer, the employee's contribution shall be the amount which he and his employer would have been required to contribute to the trust for such employee if (1) the cessation of work had not occurred and (2) the agreement requiring the employer to make contributions to the trust were in full force.
(c) The policy may provide that the continuation of insurance is contingent upon the collection of individual contributions by the union or unions representing the employees for policies referred to in Subdivision (a) above and by the policyholder or the policyholder's agent with respect to policies referred to in Subdivision (b) above.
(d) The policy may provide that the continuation of insurance on each employee is contingent upon timely payment of contributions by the individual and timely payment of the premium by the entity responsible for collecting the individual contributions.
(e) The policy may provide that each individual premium rate shall be increased by any amount up to 20 percent, or any higher percent which may be approved by the commissioner, of that otherwise shown in the policy during the period of cessation of work in order to provide sufficient compensation to the insurer to cover increased administrative costs and increased mortality and morbidity. If the policy does provide for such an increase, this shall have the effect of increasing the employee's contribution by a like percent.
(f) Nothing in this article shall be deemed to limit any right which the insurer may have in accordance with the terms of the policy to increase or decrease the premium rates before, during, or after such cessation of work if in fact the insurer would have had the right to increase the premium rate had the cessation of work not occurred. If such a premium rate change is made, it shall be effective, notwithstanding any other provisions of this article, on such date as the insurer shall determine in accordance with the terms of the policy.
(g) The policy may contain such other provisions with respect to such continuation of insurance as the Commissioner of Insurance may approve.
(h) The policy may provide that, if a premium is unpaid at the date of cessation of work and such premium became due prior to such cessation of work, the continuation of insurance is contingent upon payment of such premium prior to the date the next premium becomes due under the terms of the policy.
(i) Nothing herein shall be deemed to require the continuation of any loss of time payments included in any such group accident and health insurance policy, nor of any other coverages beyond the time that 75 percent of the employees continue such coverage or as to any individual employee beyond the time that he takes full-time employment with another employer; nor shall anything herein be deemed to require continuation of coverage more than six months after the cessation of work.
SECTION . CONFORMING AMENDMENT. Article 3.51-10, Insurance Code, is amended to read as follows:
Art. 3.51-10. NOTICE OF PREMIUM RATE INCREASE. Not less than 30 days before the date on which a premium rate increase takes effect on a group policy of [life,] health, [and] accident and health, or [a group policy of] life, health, and accident insurance delivered or issued for delivery in this state by a life, accident, health or casualty insurance company, mutual life insurance company, mutual insurance company other than life, mutual or natural premium life insurance company, general casualty company, Lloyds, reciprocal or interinsurance exchange, fraternal benefit society, group hospitalization service insurer, or local mutual aid association, the insurer shall give written notice of the premium rate increase to the policyholder or in the instance of a multiple employer trust to the trustee or group policyholder of the amount of such increase and the date on which the increase is to take effect. Such notice is also required for increases in subscriber charges and service fees under group policies or contracts or coverage provided by health maintenance organizations. Notice shall be based upon coverages in effect on the date of the notice and nothing contained herein shall be construed to prevent the insurer or health maintenance organization from negotiating changes in benefits and/or rates at the request of the policyholder after the required notice has been delivered.
SECTION . CONFORMING AMENDMENT. Section 8, Chapter 397, Acts of the 54th Legislature, Regular Session, 1955 (Article 3.70-8, Vernon's Texas Insurance Code), is amended to read as follows:
Sec. 8. APPLICATION [NON-APPLICATION] TO CERTAIN POLICIES. (a) Nothing in this Act shall apply to or affect (1) any policy of workmen's compensation insurance or any policy of liability insurance with or without supplementary expense coverage therein; or (2) any policy or contract of reinsurance; or (3) any blanket or group policy of insurance except as provided in Subsections (B) and (C) of Section 2 and Subdivision (5) of Subsection (F) of Section 1 and in article 3.70-3B; or (4) life insurance endowment or annuity contracts or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as (a) provide additional benefits in case of death or dismemberment or loss of sight by accident, or as (b) operate to safeguard such contracts against lapse, or to give a special surrender value, special benefit, or an annuity in the event that the insured or annuitant shall become totally and permanently disabled, as defined by the contract or supplemental contract, or (5) any policy written under the provisions of Senate Bill No. 208, Acts of the 51st Legislature, 1949.
(b) This Act applies to a health, accident, sickness, and hospitalization policy issued by a stipulated premium insurer subject to Chapter 884 of this code.
SECTION . CONFORMING AMENDMENT. The Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding Sections 1A, 1B, and 9Y to read as follows:
Sec. 1A. CITATION OF THIS LAW. This Act may be cited as Chapter 20A, Insurance Code, and the sections contained in this Act may be cited as articles of Chapter 20A, Insurance Code.
Sec. 1B. APPLICABILITY OF DEFINITIONS. In this Act, terms defined by Section 843.002, Insurance Code, have the meanings assigned by that section.
Sec. 9Y. EMERGENCY CARE SERVICES. A health maintenance organization shall pay for emergency care services performed by non-network physicians or providers at the negotiated or usual and customary rate and that the health care plan contains, without regard to whether the physician or provider furnishing the services has a contractual or other arrangement with the entity to provide items or services to covered individuals, the following provisions and procedures for coverage of emergency care services:
(1) any medical screening examination or other evaluation required by state or federal law that is necessary to determine whether an emergency medical condition exists will be provided to covered enrollees in a hospital emergency facility or comparable facility;
(2) necessary emergency care services will be provided to covered enrollees, including the treatment and stabilization of an emergency medical condition; and
(3) services originated in a hospital emergency facility or comparable facility following treatment or stabilization of an emergency medical condition will be provided to covered enrollees as approved by the health maintenance organization, provided that the health maintenance organization is required to approve or deny coverage of poststabilization care as requested by a treating physician or provider within the time appropriate to the circumstances relating to the delivery of the services and the condition of the patient, but in no case to exceed one hour from the time of the request; the health maintenance organization must respond to inquiries from the treating physician or provider in compliance with this provision in the health maintenance organization's plan.
SECTION . CONFORMING AMENDMENT. Section 9(j), Texas Health Maintenance Organization Act (Article 20A.09, Vernon's Texas Insurance Code) (former Subsection (i)), as amended by Chapter 1026, Acts of the 75th Legislature, Regular Session, 1997, is redesignated as Section 9Z, Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code), and amended to read as follows:
Sec. 9Z. PROMPT PAYMENT OF CLAIMS. [(j)] A health maintenance organization shall comply with Article 21.55 of the Insurance Code with respect to prompt payment to enrollees. [A health maintenance organization shall make payment to a physician or provider for covered services rendered to enrollees of the health maintenance organization not later than the 45th day after the date a claim for payment is received with documentation reasonably necessary for the health maintenance organization to process the claim or, if applicable, within the number of calendar days specified by written agreement between the physician or provider and the health maintenance organization. For purposes of this subsection, "covered services" means health care services and benefits to which enrollees are entitled under the terms of an applicable evidence of coverage.]
SECTION . CONFORMING AMENDMENT. Section 4(b), Article 21.54, Insurance Code, is amended to read as follows:
(b) Before offering insurance in this state, a risk retention group shall submit to the commissioner of this state the following:
(1) a statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and such other information, including information on its membership, as the commissioner of this state may require to verify that the group qualifies as a risk retention group under the definition in Subdivision (10) of Section 2 of this article;
(2) a copy of its plan of operation or a feasibility study and revisions of that plan or study submitted to the state in which it is chartered and licensed, provided, however, this provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which:
(A) was defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986; and
(B) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before that date; and
(3) a statement of registration that designates the commissioner as its agent for the purpose of receiving service of legal documents or process as provided by Chapter 804 [and that states the risk retention group will remit to the board a fee not to exceed $50 as established by board regulation for each document served on the commissioner of this state and forwarded to the risk retention group].
SECTION . CONFORMING AMENDMENT. Article 23.08A(a), Insurance Code, is amended to read as follows:
(a) The State of Texas by and through the commissioner shall annually determine the rate of assessment of a maintenance tax to be paid by a nonprofit legal services corporation subject to Chapter 961 of this code on an annual or semiannual basis. The rate of assessment may not exceed one percent of the correctly reported gross revenues received by all corporations issuing prepaid legal services contracts in this state. The comptroller shall collect the maintenance tax.
SECTION . CONFORMING AMENDMENT. Chapter 30, Insurance Code, is amended to read as follows:
CHAPTER 30. GENERAL PROVISIONS
Sec. 30.001. PURPOSE OF TITLES 2, 6, 7, AND 8 [TITLE]. (a) This title and Titles 6, 7, and 8 are [is] enacted as a part of the state's continuing statutory revision program, begun by the Texas Legislative Council in 1963 as directed by the legislature in the law codified as Section 323.007, Government Code. The program contemplates a topic-by-topic revision of the state's general and permanent statute law without substantive change.
(b) Consistent with the objectives of the statutory revision program, the purpose of this title and Titles 6, 7, and 8 is to make the law encompassed by the titles [this title] more accessible and understandable by:
(1) rearranging the statutes into a more logical order;
(2) employing a format and numbering system designed to facilitate citation of the law and to accommodate future expansion of the law;
(3) eliminating repealed, duplicative, unconstitutional, expired, executed, and other ineffective provisions; and
(4) restating the law in modern American English to the greatest extent possible.
Sec. 30.002. CONSTRUCTION [OF TITLE]. Except as provided by Section 30.003 and as otherwise expressly provided in this code, Chapter 311, Government Code (Code Construction Act), applies to the construction of each provision in this title and in Titles 6, 7, and 8 [except as otherwise expressly provided by this title].
Sec. 30.003. DEFINITION OF PERSON. The definition of person assigned by Section 311.005, Government Code, does not apply to any provision in this title or in Title 6, 7, or 8.
Sec. 30.004. REFERENCE IN LAW TO STATUTE REVISED BY TITLE 2, 6, 7, OR 8. A reference in a law to a statute or a part of a statute revised by this title or by Title 6, 7, or 8 is considered to be a reference to the part of this code [title] that revises that statute or part of that statute.
SECTION . CONFORMING AMENDMENT. Sections 82.002(b) and (c), Insurance Code, are amended to more accurately reflect the source law from which they were derived to read as follows:
(b) This chapter also applies to:
(1) an agent of an entity described by Subsection (a); and
(2) an individual or a corporation, association, partnership, or other artificial [a] person who:
(A) is engaged in the business of insurance;
(B) holds an authorization; or
(C) is regulated by the commissioner.
(c) The commissioner's authority under this chapter applies to each form of authorization and each person or entity holding an authorization.
SECTION . CONFORMING AMENDMENT. Section 83.001(3), Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
(3) "Unauthorized person" means an individual or a corporation, association, partnership, or other artificial [a] person who directly or indirectly does an act of insurance business that is:
(A) described by Section 101.051 or 101.052; and
(B) not done in accordance with specific authorization of law.
SECTION . CONFORMING AMENDMENT. Section 83.002(b), Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
(b) This chapter also applies to:
(1) an agent of an entity described by Subsection (a); and
(2) an individual or a corporation, association, partnership, or other artificial [a] person who:
(A) is engaged in the business of insurance;
(B) holds a permit, certificate, registration, license, or other authority under this code; or
(C) is regulated by the commissioner.
SECTION . CONFORMING AMENDMENT. Section 101.001(c), Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
(c) The purpose of this chapter is to subject certain insurers and [other] persons to the jurisdiction of:
(1) the commissioner and proceedings before the commissioner; and
(2) the courts of this state in suits by or on behalf of the state or an insured or beneficiary under an insurance contract.
SECTION . CONFORMING AMENDMENT. Section 101.051(b), Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
(b) The following acts in this state constitute the business of insurance in this state:
(1) making or proposing to make, as an insurer, an insurance contract;
(2) making or proposing to make, as guarantor or surety, a guaranty or suretyship contract as a vocation and not merely incidental to another legitimate business or activity of the guarantor or surety;
(3) taking or receiving an insurance application;
(4) receiving or collecting any consideration for insurance, including:
(A) a premium;
(B) a commission;
(C) a membership fee;
(D) an assessment; or
(E) dues;
(5) issuing or delivering an insurance contract to:
(A) a resident of this state; or
(B) a person authorized to do business in this state;
(6) directly or indirectly acting as an agent for or otherwise representing or assisting an insurer or [other] person in:
(A) soliciting, negotiating, procuring, or effectuating insurance or a renewal of insurance;
(B) disseminating information relating to coverage or rates;
(C) forwarding an insurance application;
(D) delivering an insurance policy or contract;
(E) inspecting a risk;
(F) setting a rate;
(G) investigating or adjusting a claim or loss;
(H) transacting a matter after the effectuation of the contract that arises out of the contract; or
(I) representing or assisting an insurer or [other] person in any other manner in the transaction of insurance with respect to a subject of insurance that is resident, located, or to be performed in this state;
(7) contracting to provide in this state indemnification or expense reimbursement for a medical expense by direct payment, reimbursement, or otherwise to a person domiciled in this state or for a risk located in this state, whether as an insurer, agent, administrator, trust, or funding mechanism or by another method;
(8) doing any kind of insurance business specifically recognized as constituting insurance business within the meaning of statutes relating to insurance;
(9) doing or proposing to do any insurance business that is in substance equivalent to conduct described by Subdivisions (1)-(8) in a manner designed to evade statutes relating to insurance; or
(10) any other transaction of business in this state by an insurer.
SECTION . CONFORMING AMENDMENT. Section 101.052, Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
Sec. 101.052. ADVERTISING RELATING TO MEDICARE SUPPLEMENT POLICIES. With respect to a Medicare supplement policy authorized under Article 3.74, the business of insurance in this state includes using, creating, publishing, mailing, or disseminating in this state an advertisement relating to an act that constitutes the business of insurance under Section 101.051 unless the advertisement is used, created, published, mailed, or disseminated on behalf of an insurer or [other] person who:
(1) is authorized under this code to engage in the business of insurance in this state;
(2) has actual knowledge of the content of the advertisement;
(3) has authorized the advertisement to be used, created, published, mailed, or disseminated on that insurer's or [other] person's behalf; and
(4) is clearly identified by name in the advertisement as the sponsor of the advertisement.
SECTION . CONFORMING AMENDMENT. Section 101.053(b), Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
(b) Sections 101.051 and 101.052 do not apply to:
(1) the lawful transaction of surplus lines insurance under Chapter 981 [Article 1.14-2];
(2) the lawful transaction of reinsurance by insurers;
(3) a transaction in this state that:
(A) involves a policy that:
(i) is lawfully solicited, written, and delivered outside this state; and
(ii) covers, at the time the policy is issued, only subjects of insurance that are not resident, located, or expressly to be performed in this state; and
(B) takes place after the policy is issued;
(4) a transaction:
(A) that involves an insurance contract independently procured through negotiations occurring entirely outside this state;
(B) that is reported; and
(C) on which premium tax is paid in accordance with this chapter;
(5) a transaction in this state that:
(A) involves group life, health, or accident insurance, other than credit insurance, and group annuities in which the master policy for the group was lawfully issued and delivered in a state in which the insurer or [other] person was authorized to do insurance business; and
(B) is authorized by a statute of this state;
(6) a management or accounting activity in this state on behalf of a nonadmitted captive insurance company that insures solely directors' and officers' liability insurance for:
(A) the directors and officers of the company's parent and affiliated companies;
(B) the risks of the company's parent and affiliated companies; or
(C) both the individuals and entities described by Paragraphs (A) and (B);
(7) the issuance of a qualified charitable gift annuity under Chapter 102; or
(8) a lawful transaction by a servicing company of the Texas workers' compensation employers' rejected risk fund under Section 4.08, Article 5.76-2, as that article existed before its repeal.
SECTION . CONFORMING AMENDMENT. Section 101.151, Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
Sec. 101.151. POWERS OF COMMISSIONER; NOTICE OF HEARING. (a) The commissioner may set a hearing on whether to issue a cease and desist order under Section 101.153 if the commissioner has reason to believe that:
(1) an insurer or [other] person has violated or is threatening to violate this chapter or a rule adopted under this chapter; or
(2) an insurer or [other] person acting in violation of this chapter has engaged in or is threatening to engage in an unfair act.
(b) The commissioner shall serve on the insurer or [other] person a statement of charges and a notice of hearing in the form provided by Section 2001.052, Government Code, and applicable rules of the commissioner.
SECTION . CONFORMING AMENDMENT. Section 101.153, Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
Sec. 101.153. CEASE AND DESIST ORDER. After a hearing held under this subchapter, the commissioner may issue against the insurer or [other] person charged with a violation an order that requires that the insurer or [other] person immediately cease and desist from the violation.
SECTION . CONFORMING AMENDMENT. Section 101.154, Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
Sec. 101.154. ENFORCEMENT; REFERRAL TO ATTORNEY GENERAL. The commissioner may refer the matter to the attorney general for enforcement if the commissioner has reason to believe that an insurer or [other] person has:
(1) violated a cease and desist order issued under this subchapter; or
(2) failed to pay an assessed penalty.
SECTION . CONFORMING AMENDMENT. Section 101.202, Insurance Code, is amended to more accurately reflect the source law from which it was derived to read as follows:
Sec. 101.202. ATTORNEY'S FEES. (a) In an action against an unauthorized insurer or [other] unauthorized person on a contract of insurance issued or delivered in this state to a resident of this state or to a corporation authorized to do business in this state, the court may award to the plaintiff a reasonable attorney's fee if:
(1) the insurer or [other] person failed, for at least 30 days after a demand made before the commencement of the action, to make payment under the contract's terms; and
(2) the failure to make the payment was vexatious and without reasonable cause.
(b) An insurer's or [other] person's failure to defend an action described by Subsection (a) is prima facie evidence that the failure to make payment was vexatious and without reasonable cause.
SECTION . CONFORMING AMENDMENT. Chapter 101, Insurance Code, is amended by adding Subchapter H to read as follows:
SUBCHAPTER H. CERTAIN PROCEEDINGS; BOND
REQUIREMENTS
Sec. 101.351. DEFINITIONS. (a) In this subchapter, "court proceeding" includes an action or suit.
(b) The definition of "state" assigned by Section 311.005, Government Code, does not apply in this chapter. (New.)
Sec. 101.352. APPLICABILITY. This subchapter applies only to a court or administrative proceeding against an unauthorized person or insurer in which the person or insurer was served under Section 804.107. (V.T.I.C. Art. 1.36, Secs. 11(a) (part), (b) (part).)
Sec. 101.353. BOND REQUIREMENT FOR COURT PROCEEDING. (a) Except as provided by Subsection (c), before an unauthorized person or insurer may file a pleading in a court proceeding to which this subchapter applies, the person or insurer must deposit cash or securities or file a bond with good and sufficient sureties approved by the court in an amount determined by the court as sufficient to pay any final judgment that may be rendered in the proceeding.
(b) An unauthorized person or insurer must file the deposit required by this section with the clerk of the court in which the proceeding is pending.
(c) The court may issue an order waiving the deposit or bond required by this section if the unauthorized person or insurer demonstrates to the court's satisfaction that the person or insurer maintains sufficient available funds or securities in a state in the United States, in trust or otherwise, to satisfy any final judgment that may be rendered in the proceeding. (V.T.I.C. Art. 1.36, Sec. 11(a) (part).)
Sec. 101.354. BOND REQUIREMENT FOR ADMINISTRATIVE PROCEEDING. (a) Except as provided by Subsection (c), before an unauthorized person or insurer may file a pleading in an administrative proceeding of the department to which this subchapter applies, the person or insurer must, if required by statute, deposit cash or securities or file a bond with good and sufficient sureties approved by the commissioner in an amount determined by the commissioner as sufficient to pay any final order that may be entered in the proceeding.
(b) An unauthorized person or insurer must file the deposit required by this section with the chief clerk of the department.
(c) The commissioner may issue an order waiving the deposit or bond required by this section if the unauthorized person or insurer demonstrates to the commissioner's satisfaction that the person or insurer maintains sufficient available funds or securities in a state in the United States, in trust or otherwise, to satisfy any final order that may be entered in the proceeding. (V.T.I.C. Art. 1.36, Sec. 11(a) (part).)
Sec. 101.355. POSTPONEMENT. A court or the commissioner may order any postponement necessary to afford an unauthorized person or insurer a reasonable opportunity to:
(1) comply with Section 101.353 or 101.354, as appropriate; and
(2) defend that court or administrative proceeding. (V.T.I.C. Art. 1.36, Sec. 11(b) (part).)
Sec. 101.356. MOTION TO QUASH. Sections 101.353 and 101.354 do not prevent an unauthorized person or insurer from filing a motion to quash a writ or to set aside service made under Section 804.107 on the ground that the person or insurer has not engaged in the business of insurance as described by Section 101.051. (V.T.I.C. Art. 1.36, Sec. 11(c).)
SECTION . CONFORMING AMENDMENT. Section 72.001(c), Property Code, is amended to read as follows:
(c) This chapter applies to property held by life insurance companies with the exception of unclaimed proceeds to which Chapter 1109 [funds, as defined by Section 3, Article 4.08], Insurance Code, applies and that are held by those companies that are subject to Chapter 1109 [Article 4.08], Insurance Code.
SECTION . REPEALER. (a) The following articles of the Insurance Code are repealed: 1.14; 1.14A; 1.28; 1.29; 1.36; 1.38; 2.01; 2.02; 2.03; 2.04; 2.05; 2.06; 2.07; 2.08; 2.09; 2.11; 2.12; 2.13; 2.14; 2.15; 2.16; 2.17; 2.18; 2.19; 2.20; 2.21; 3.01; 3.02; 3.02a; 3.04; 3.05; 3.06; 3.07; 3.08; 3.09; 3.12; 3.13; 3.15; 3.20; 3.20-1; 3.21; 3.22; 3.23; 3.24; 3.24-1; 3.26; 3.27; 3.27-1; 3.27-2; 3.27-3; 3.27-4; 3.42A; 3.44; 3.44a; 3.44b; 3.44c; 3.44d; 3.45; 3.46; 3.47; 3.48; 3.49; 3.50; 3.50-1; 3.50-2A; 3.50-4; 3.50-5; 3.50-6; 3.50-6A; 3.51-4A; 3.52; 3.53; 3.54; 3.55; 3.56-1; 3.57; 3.58; 3.60; 3.61; 3.63; 3.67; 3.68; 3.69; 3.75; 3.95-1; 3.95-1.5; 3.95-1.6; 3.95-1.7; 3.95-2; 3.95-3; 3.95-4; 3.95-4.1; 3.95-4.2; 3.95-4.3; 3.95-4.4; 3.95-4.5; 3.95-4.6; 3.95-4.7; 3.95-4.8; 3.95-4.9; 3.95-4.10; 3.95-5; 3.95-6; 3.95-7; 3.95-8; 3.95-9; 3.95-10; 3.95-11; 3.95-12; 3.95-13; 3.95-14; 3.95-15; 4.08; 5.01-2; 6.01; 6.01-A; 6.02; 6.03; 6.04; 6.05; 6.06; 6.07; 6.08; 6.11; 6.12; 6.13; 6.14; 6.15; 6.16; 8.01; 8.02; 8.03; 8.04; 8.05; 8.06; 8.07; 8.08; 8.09; 8.10; 8.11; 8.12; 8.13; 8.14; 8.15; 8.16; 8.17; 8.18; 8.19; 8.20; 8.21; 8.23; 8.24; 10.01; 10.02; 10.03; 10.03A; 10.03B; 10.03-1; 10.04; 10.05; 10.06; 10.07; 10.08; 10.09; 10.10; 10.11; 10.12; 10.12-1; 10.13; 10.14; 10.15; 10.16; 10.17; 10.18; 10.19; 10.20; 10.21; 10.22; 10.23; 10.25; 10.26; 10.27; 10.28; 10.29; 10.30; 10.31; 10.33; 10.34; 10.35; 10.36; 10.37; 10.37-1; 10.37-2; 10.37-3; 10.38; 10.39; 10.40; 10.41; 10.42; 10.43; 10.44; 10.45; 11.01; 11.02; 11.03; 11.04; 11.05; 11.06; 11.07; 11.08; 11.10; 11.11; 11.12; 11.13; 11.14; 11.15; 11.16; 11.17; 11.18; 11.18-1; 11.19; 11.20; 11.21; 12.01; 12.02; 12.03; 12.04; 12.05; 12.06; 12.07; 12.08; 12.09; 12.10; 12.11; 12.12; 12.13; 12.14; 12.15; 12.16; 12.17; 12.18; 13.01; 13.02; 13.03; 13.04; 13.05; 13.06; 13.07; 13.08; 13.09; 14.01; 14.02; 14.03; 14.04; 14.05; 14.06; 14.07; 14.08; 14.09; 14.10; 14.11; 14.12; 14.13; 14.14; 14.14a; 14.15; 14.16; 14.17; 14.17A; 14.18; 14.19; 14.20; 14.21; 14.22; 14.23; 14.24; 14.25; 14.26; 14.27; 14.28; 14.29; 14.30; 14.31; 14.32; 14.33; 14.35; 14.36; 14.37; 14.37-1; 14.38; 14.39; 14.42; 14.43; 14.44; 14.45; 14.46; 14.47; 14.48; 14.49; 14.50; 14.51; 14.52; 14.53; 14.54; 14.55; 14.56; 14.56-1; 14.57; 14.58; 14.59; 14.60; 14.61; 14.62; 14.63; 14.64; 15.01; 15.02; 15.03; 15.04; 15.05; 15.05-A; 15.06; 15.07; 15.08; 15.09; 15.10; 15.11; 15.12; 15.13; 15.14; 15.15; 15.16; 15.17; 15.18; 15.19; 15.19-1; 15.19-2; 15.20; 15.20-1; 15.21; 15.22; 16.01; 16.02; 16.03; 16.04; 16.05; 16.06; 16.07; 16.08; 16.09; 16.10; 16.11; 16.12; 16.13; 16.14; 16.15; 16.16; 16.17; 16.18; 16.19; 16.20; 16.21; 16.22; 16.23; 16.24; 16.24A; 16.25; 16.26; 16.27; 17.01; 17.02; 17.03; 17.04; 17.05; 17.06; 17.07; 17.08; 17.09; 17.10; 17.11; 17.12; 17.13; 17.14; 17.15; 17.16; 17.17; 17.19; 17.20; 17.21; 17.22; 17.23; 17.24; 17.25; 18.01; 18.01-1; 18.02; 18.03; 18.03-1; 18.04; 18.05; 18.06; 18.07; 18.08; 18.09; 18.10; 18.11; 18.11-1; 18.12; 18.13; 18.14; 18.15; 18.16; 18.18; 18.19; 18.21; 18.22; 18.22-1; 18.23; 18.23A; 18.24; 19.01; 19.02; 19.02A; 19.03; 19.05; 19.06; 19.07; 19.08; 19.09; 19.10; 19.10-1; 19.11; 19.12; 19.12A; 19.13; 20.01; 20.02; 20.03; 20.04; 20.05; 20.06; 20.08; 20.09; 20.10; 20.11; 20.12; 20.13; 20.14; 20.15; 20.16; 20.17; 20.18; 20.19; 20.20; 20.21; 20C.01; 20C.02; 20C.03; 20C.04; 20C.05; 20C.06; 20C.07; 20C.08; 20C.09; 20C.10; 20C.11; 20C.12; 20C.13; 20C.14; 20C.15; 21.22; 21.23; 21.24; 21.25; 21.26; 21.27; 21.34; 21.37; 21.43; 21.44; 21.45; 21.49-1; 21.49-2C; 21.52F; 22.01; 22.02; 22.03; 22.04; 22.05; 22.06; 22.07; 22.08; 22.09; 22.10; 22.11; 22.12; 22.13; 22.14; 22.15; 22.16; 22.17; 22.18; 22.19; 22.20; 22.21; 22.22; 22.23; 22.23A; 23.01; 23.02; 23.03; 23.04; 23.05; 23.06; 23.07; 23.08; 23.09; 23.10; 23.11; 23.12; 23.13; 23.14; 23.15; 23.16; 23.17; 23.18; 23.19; 23.20; 23.21; 23.22; 23.23; 23.24; 23.25; and 23.26.
(b) The following laws are repealed:
(1) Sections 1, 2, 3, 3A, 4, 5, 6, 6A, 7, 8, 9, 10, 13, 14, 15, 15A, 16, 17, 17A, and 18, Article 1.14-2, Insurance Code;
(2) Section 12a, Chapter 117, Acts of the 54th Legislature, Regular Session, 1955 (Article 2.03-1, Vernon's Texas Insurance Code);
(3) Chapter 113, Acts of the 53rd Legislature, Regular Session, 1953 (Article 3.49-1, Vernon's Texas Insurance Code);
(4) Section 1, Chapter 417, Acts of the 56th Legislature, Regular Session, 1959 (Article 3.49-2, Vernon's Texas Insurance Code);
(5) Article 3.49-3, Insurance Code, as added by Chapter 701, Acts of the 60th Legislature, Regular Session, 1967;
(6) the Texas Employees Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code);
(7) Section 3, Chapter 662, Acts of the 76th Legislature, Regular Session, 1999;
(8) the Texas State College and University Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's Texas Insurance Code);
(9) Article 3.50-4A, Insurance Code, as added by Chapter 372, Acts of the 76th Legislature, Regular Session, 1999;
(10) Article 3.50-4A, Insurance Code, as added by Chapter 1540, Acts of the 76th Legislature, Regular Session, 1999;
(11) Section 1, Chapter 123, Acts of the 60th Legislature, Regular Session, 1967 (Article 3.51-3, Vernon's Texas Insurance Code);
(12) Section 3B(m), Article 3.51-6, Insurance Code;
(13) Sections 1, 2, 3, 4, 5, 6, 6A, 7, 8, 10, 11, 11A, 11B, 12, 12A, 12B, 13, 13A, 13B, 13C, 14, 16, 17, 18, 18B, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 34, 35, 36, 37, and 38, Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code);
(14) Section 18A, Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code), as added by Chapter 735, Acts of the 75th Legislature, Regular Session, 1997;
(15) Section 18A, Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code), as added by Chapter 1026, Acts of the 75th Legislature, Regular Session, 1997; and
(16) Section B, Article 10.04, Texas Non-Profit Corporation Act (Article 1396-10.04, Vernon's Texas Civil Statutes).
SECTION . LEGISLATIVE INTENT. This Act is enacted under Section 43, Article III, Texas Constitution. This Act is intended as a recodification only, and no substantive change in law is intended by this Act.
SECTION . EFFECTIVE DATE. This Act takes effect June 1, 2003.
COMMITTEE AMENDMENT NO. 1
Amend H.B. 2811 as follows:
(1) In Chapter 802, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 802.051 and substitute the following:
Sec. 802.051. APPLICABILITY OF SUBCHAPTER. This subchapter applies to each company regulated by the commissioner, including:
(1) a stock life, health, or accident insurance company;
(2) a mutual life, health, or accident insurance company;
(3) a stock fire or casualty insurance company;
(4) a mutual fire or casualty insurance company;
(5) a Mexican casualty company;
(6) a Lloyd's plan;
(7) a reciprocal or interinsurance exchange;
(8) a fraternal benefit society;
(9) a title insurance company;
(10) an attorney's title insurance company;
(11) a stipulated premium insurance company;
(12) a nonprofit legal service corporation;
(13) a health maintenance organization;
(14) a statewide mutual assessment company;
(15) a local mutual aid association;
(16) a local mutual burial association;
(17) an association exempt under Section 887.102;
(18) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842;
(19) a county mutual insurance company; and
(20) a farm mutual insurance company. (V.T.I.C. Art. 1.11, Subsec. (b) (part).)
(2) In Section 821.051, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), between "inland" and "insurance", insert "marine".
(3) In Section 823.053, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(1), strike "distribution" and substitute "dividend or distribution".
(4) In Section 823.107, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "DISTRIBUTIONS" in the section heading and substitute "DIVIDENDS OR DISTRIBUTIONS" and strike "extraordinary distribution" in each place the phrase appears in that section and substitute "extraordinary dividend or distribution".
(5) In Section 823.107, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (c), strike "proposed distribution" and substitute "proposed dividend or distribution".
(6) In Section 823.107, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsections (d) and (e), strike "the distribution" in each place the phrase appears in those subsections and substitute "the dividend or distribution".
(7) In Section 828.051, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "Article 3.39 does" and substitute "Articles 3.33 and 3.39 do".
(8) In Section 828.054, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "Article 3.39" and substitute "Article 3.33 or 3.39".
(9) In Section 828.055, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "or request or an" and substitute "request to purchase, or".
(10) In Section 828.056, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike "Article 3.39" and substitute "Article 3.33 or 3.39".
(11) In Section 841.259, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, strike "PROHIBITED".
(12) In Section 843.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), following Subdivision (28), insert the following:
(29) "Uncovered liabilities" means obligations resulting from unpaid uncovered expenses, the outstanding indebtedness of loans that are not specifically subordinated to uncovered medical and health care expenses or guaranteed by the sponsoring organization, and all other monetary obligations that are not similarly subordinated or guaranteed.
(13) In Section 843.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the recitation of the source law for that section, between "(w) as amended Acts 75th Leg., R.S., Ch. 1023;" and "(x)", insert "(w) as amended Acts 75th Leg., R.S., Ch. 1026;".
(14) In Section 843.076, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(1), strike "commissioner rule" and substitute "rules adopted by the commissioner".
(15) In Section 843.080, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike the second sentence and substitute: "If, before the 31st day after the date a modification or amendment for which the commissioner's approval is required is filed, the commissioner does not disapprove the modification or amendment, it is considered approved."
(16) In Section 843.082, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, before "APPROVAL", insert "REQUIREMENTS FOR".
(17) In Section 843.102, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (d) and substitute the following:
(d) A health maintenance organization shall record formal proceedings of quality assurance program activities and maintain documentation in a confidential manner. The health maintenance organization shall make the quality assurance program minutes available to the commissioner.
(18) In Section 843.201, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike "a handbook provided by the health maintenance organization" and substitute "the health maintenance organization's handbook".
(19) In Section 843.208, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (2), strike "commissioner rule" and substitute "rules adopted by the commissioner".
(20) In Section 846.059, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "pay to the commissioner" and substitute "pay to the department".
(21) In Chapter 862, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 862.001, 862.002, 862.052, 862.151, 862.152, and 862.154, strike "inland insurance" in each place the phrase appears in those sections and substitute "inland marine insurance".
(22) In Section 862.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (b)(7)(A) and substitute the following:
(A) separately the amount received, after deducting reinsurance, as fire, marine, and inland marine transportation premiums;
(23) In Section 882.559, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike "commissioner" in each place the word appears in that subsection and substitute "department".
(24) In Chapter 883, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 883.001 and substitute the following:
Sec. 883.001. DEFINITIONS. In this chapter:
(1) "Domestic mutual insurance company" means a mutual insurance company organized under this chapter.
(2) "Foreign mutual insurance company" means a mutual insurance company organized under the laws of a jurisdiction other than this state and authorized to engage in the business of insurance on a mutual plan in any state, district, or territory. (V.T.I.C. Arts. 15.14 (part), 15.15 (part); New.)
(25) In Section 883.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "a mutual insurance company and a foreign mutual insurance company" and substitute "domestic and foreign mutual insurance companies".
(26) In Chapter 883, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 883.002, 883.003, 883.102, 883.151, 883.154, 883.155, 883.159, 883.201, 883.202, and 883.203, strike "mutual insurance company organized under this chapter" in each place the phrase appears in those sections and substitute "domestic mutual insurance company".
(27) In Section 883.204, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "A mutual insurance company and a foreign mutual insurance company" and substitute "Domestic and foreign mutual insurance companies".
(28) In Chapter 883, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 883.206 and 883.207, strike "A mutual insurance company and a foreign mutual insurance company organized or operating under this chapter are" and substitute "Each domestic or foreign mutual insurance company organized or operating under this chapter is".
(29) In Section 884.056, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "commissioner" in each place the word appears in that section and substitute "department".
(30) In Section 884.554, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "COMMISSIONER" in the section heading and substitute "DEPARTMENT" and strike "commissioner" in each other place the word appears in that section and substitute "department".
(31) In Chapter 884, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subchapter O and substitute the following:
SUBCHAPTER O. GENERAL FINANCIAL REGULATION
Sec. 884.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION. Articles 1.32, 21.28, and 21.28-A apply to a stipulated premium company engaged in the business of insurance in this state. (New.)
(32) In Section 885.203, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike "any state court" and substitute "a state court".
(33) In Section 885.404, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (c), strike "the life of a woman" and substitute "a female risk".
(34) In Section 885.501, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (2), strike "benefit members" and substitute "members holding benefit certificates".
(35) In Section 885.703, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(3), strike "the fine" and substitute "a fine".
(36) In Section 886.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), between "entity" and "authorized", insert ", including a society or association of any sort,".
(37) In Section 886.104, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d), strike "certificate" and substitute "policy".
(38) In Section 886.107, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike the first sentence and substitute: "For the filing of each annual statement, the department shall charge the appropriate fee."
(39) In Section 887.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subdivisions (3)-(6) and substitute the following:
(3) "Insurance certificate" means an insurance policy, contract of insurance, certificate of membership, or other document through which insurance is effected or evidenced.
(4) "Member" includes a certificate holder or any other insured of an association.
(5) "Membership fee" means the amount of the first assessment or assessments placed in the expense fund of an association and representing the cost of soliciting or procuring a member, as permitted by the department.
(6) "Mortuary fund" includes a mortuary fund, relief fund, claim fund, or similar fund.
(40) In Section 887.051, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (c) and substitute the following:
(c) An association's bylaws must contain all things required by this chapter and may not contain any provision in conflict with this chapter.
(41) In Section 887.054, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(3), strike "loss to the association" and substitute "loss sustained by the association".
(42) In Chapter 887, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 887.054, 887.064, 887.203, 887.207, 887.210, 887.352, 887.353, 887.354, 887.355, 887.356, 887.357, 887.359, 887.360, and 887.406, strike "claim fund" in each place the phrase appears in those sections and substitute "mortuary fund".
(43) In Section 887.055, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a)(3), strike "loss to the association" and substitute "loss sustained by the association".
(44) In Section 887.055, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "claim funds" and substitute "mortuary funds".
(45) In Section 887.060, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(3), strike "claim and expense funds" and substitute "mortuary and expense funds".
(46) In Sections 887.154, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (3)(A), strike "expense and claim funds" and substitute "mortuary and expense funds".
(47) In Section 887.255, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, before "INSURANCE", insert "LIFE".
(48) In Section 887.255, Insurance Code, as added by SECTION 1 of the bill (introduced version), following Subsection (g), insert the following:
(h) This section does not apply to health and accident insurance policies.
(49) In Section 887.301, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d)(2), strike "or claim".
(50) In Section 887.302, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "accident and health" and substitute "accident, health, and hospitalization".
(51) In Chapter 887, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the heading for Subchapter H, strike "CLAIM" and substitute "MORTUARY".
(52) In Section 887.351, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "CLAIM" in the section heading and substitute "MORTUARY" and strike "claim" in the other place the word appears in that section and substitute "mortuary".
(53) In Section 887.354, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a)(2), strike "accident or health" and substitute "accident, health, or hospitalization".
(54) In Section 887.358, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "CLAIM FUND" in the section heading and substitute "MORTUARY FUND" and strike "claim fund" in the other place the phrase appears in that section and substitute "mortuary fund".
(55) In Section 887.360, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "accident or health" in each place the phrase appears in that section and substitute "accident, health, or hospitalization".
(56) In Section 887.404, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ACCIDENT AND HEALTH" in the section heading and substitute "ACCIDENT, HEALTH, AND HOSPITALIZATION" and strike "accident and health" in the other place the phrase appears in that section and substitute "accident, health, and hospitalization".
(57) In Section 887.405, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d), after "compute", insert "or cause to be computed".
(58) In Section 887.455, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a)(1), strike "any laws" and substitute "all laws".
(59) In Section 887.457, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "CLAIM FUND" in the section heading and substitute "MORTUARY FUND" and strike "claim fund" in each other place the phrase appears in that section and substitute "mortuary fund".
(60) In Section 887.502, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (1), strike "or claim".
(61) In Chapter 887, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subchapter L and substitute the following:
SUBCHAPTER L. GENERAL FINANCIAL REGULATION
Sec. 887.551. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION. Articles 1.32, 21.28, and 21.28-A apply to an association engaged in the business of insurance in this state. (New.)
(62) In Section 888.151, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, strike "STUDIES RELATED TO BURIAL ASSOCIATIONS AND" and substitute "DATA COLLECTION RELATED TO".
(63) In Chapter 888, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 888.151 and substitute the following:
Sec. 888.151. STUDIES RELATED TO BURIAL ASSOCIATIONS AND RATES. (a) The commissioner shall:
(1) collect data, statistics, and information on the death rates, lapses, experiences, and other information relating to burial association rates in and outside of this state that the commissioner considers useful in determining reasonable and adequate rates for burial associations; and
(2) study the statistics, rates, and experiences of burial associations.
(b) The commissioner may distribute information collected under Subsection (a)(1) to burial associations in this state. (V.T.I.C. Arts. 14.47, 14.48 (part).)
(64) In Section 888.152, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, strike "BY COMMISSIONER".
(65) In Section 888.152, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (e), strike "commissioner" and substitute "department".
(66) In Section 888.154, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "commissioner" in each place the word appears in that section and substitute "department" and strike "commissioner's" in each place the word appears in that section and substitute "department's".
(67) In Section 888.156, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "commissioner's" and substitute "department's" and strike "commissioner" and substitute "department".
(68) In Section 888.157, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike "commissioner's" and substitute "department's".
(69) In Section 888.202, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "commissioner" and substitute "department".
(70) In Chapter 888, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 888.204 and substitute the following:
Sec. 888.204. CERTAIN AFFILIATIONS BETWEEN BURIAL ASSOCIATIONS AND FUNERAL HOMES PROHIBITED. (a) It is against the public policy of this state for a funeral home or an owner of an interest in a funeral home to be directly or indirectly connected or affiliated with more than one burial association.
(b) The commissioner shall adopt rules as necessary to implement this section. (V.T.I.C. Art. 14.51 (part).)
(71) In Section 911.202, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "principal office" and substitute "home office".
(72) In Section 911.303, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) The farm mutual insurance company may contract for mutual or reciprocal reinsurance with another company on the mutual or cooperative plan subject to the following conditions:
(1) the farm mutual company may assume the reinsurance on the risks of the other company only if the other company reinsures the risks of the farm mutual insurance company; and
(2) the farm mutual company may write or assume the reinsurance only on property that the company is authorized to insure and that is located in this state.
(73) In Section 911.303, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (c), strike "contract of interinsurance" and substitute "reinsurance contract".
(74) In Section 912.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) A county mutual insurance company is exempt from the operation of all insurance laws of this state, including the flexible rating program under Article 5.101, except laws that are made applicable by their specific terms or except as specifically provided by this chapter.
(75) In Section 912.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(1), strike ", 822.057(a)(3), (b), and (c), 822.058(b) and (c),".
(76) In Section 912.055, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (2), strike "association" and substitute "company".
(77) In Section 912.251, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "Articles 21.07 and 21.14" and substitute "Article 21.07 or 21.14".
(78) In Section 912.304, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) The county mutual insurance company may contract for mutual or reciprocal reinsurance with another company on the mutual or cooperative plan subject to the following conditions:
(1) the county mutual insurance company may assume the reinsurance on the risks of the other company only if the other company reinsures the risks of the county mutual insurance company; and
(2) the county mutual insurance company may write or assume the reinsurance only on property that the company is authorized to insure and that is located in this state.
(79) In Section 912.304, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (c), strike "contract of interinsurance" and substitute "reinsurance contract".
(80) In Chapter 912, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subchapter G, insert new Section 912.310 to read as follows:
Sec. 912.310. CERTAIN COMPANIES EXEMPT. (a) Chapter 196, Acts of the 53rd Legislature, Regular Session, 1953, and Chapter 117, Acts of the 54th Legislature, Regular Session, 1955, do not apply to a county mutual insurance company:
(1) that was organized and operating as a county mutual fire insurance company on May 22, 1953; and
(2) the business of which is devoted exclusively to the writing of industrial fire insurance policies covering dwellings, household goods and wearing apparel on a weekly, monthly, or quarterly basis on a continuous premium payment plan.
(b) The exemption established by this section applies only so long as the company is engaged exclusively in the writing of industrial fire insurance policies described by Subsection (a). (V.T.I.C. Art. 17.02 (part).)
(81) In Chapter 912, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subchapter O and substitute the following:
SUBCHAPTER O. GENERAL FINANCIAL REGULATION
Sec. 912.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION. Articles 1.32, 21.28, and 21.28-A apply to a county mutual insurance company engaged in the business of insurance in this state. (New.)
(82) In Section 941.003, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) A Lloyd's plan is exempt from the operation of all insurance laws of this state except as specifically provided in this chapter or unless it is specifically provided in the other law that the law is applicable.
(83) In Section 941.003, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d)(1), strike "replaces" and substitute "are instead of".
(84) In Section 941.004, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "commissioner" in each place the word appears in that section and substitute "department".
(85) In Section 941.102, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b)(6), strike "commissioner" and substitute "department".
(86) In Section 941.202, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d), between "fact" and "may", insert "for a Lloyd's plan".
(87) In Chapter 941, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 941.206 and substitute the following:
Sec. 941.206. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION; IMPAIRMENT OF SURPLUS. (a) Articles 1.32, 21.28, and 21.28-A apply to a Lloyd's plan engaged in the business of insurance in this state.
(b) Section 5, Article 1.10, applies to a Lloyd's plan. (V.T.I.C. Art. 18.07; New.)
(88) In Section 941.251, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), in the first sentence, between "fact" and the period, insert "for a Lloyd's plan".
(89) In Section 942.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (1), between "authorization" and the comma, insert "of the attorney in fact".
(90) In Section 942.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (c) and substitute the following:
(c) An exchange may not engage in the business of life insurance.
(91) In Section 942.003, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) An exchange is exempt from the operation of all insurance laws of this state except as specifically provided in this chapter or unless exchanges are specifically mentioned in the other law.
(92) In Section 942.003, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (e)(1), strike "subscriber declaration" and substitute "declaration of the subscribers".
(93) In Section 942.159, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) An attorney in fact commits an offense if the attorney in fact:
(1) exchanges a reciprocal or interinsurance contract without first complying with the law governing the contract; or
(2) directly or indirectly solicits or negotiates an application for the contract without first complying with the law governing the contract.
(94) In Section 942.203, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike "appropriate" and substitute "applicable".
(95) In Section 961.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subdivision (2) and substitute the following:
(2) "Benefit certificate" means a document issued to a participant that states the benefits and other required matters under a group contract for legal services or an individual contract for legal services issued to a participant.
(96) In Section 961.002, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (b), strike Subdivisions (1)-(6) and substitute the following:
(1) Articles 1.01, 1.09-1, 1.11, 1.12, 1.13, 1.15, 1.15A, 1.16, 1.17, 1.18, 1.19, 1.20, 1.21, 1.22, 21.21, 21.21-2, 21.28, 21.28-A, 21.47, and 21.49-8;
(2) Sections 2, 6, and 17, Article 1.10;
(3) Sections 31.002, 31.004, 31.007, 31.021, 31.022, 31.023, 31.025, 31.026, 31.027, 32.001, 32.002, 32.003, 32.021, 32.022(a), 32.023, 32.041, 33.002, 33.006, 38.001, 81.004, 801.001, 801.002, 801.051-801.055, 801.057, 801.101, 801.102, 802.003, 841.251, and 841.252;
(4) Subchapter B, Chapter 31;
(5) Subchapter D, Chapter 36;
(6) Subchapter A, Chapter 805; and
(7) Chapter 824.
(97) In Chapter 961, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Section 961.003 and substitute the following:
Sec. 961.003. CORPORATION SUBJECT TO DEPARTMENT REGULATION. Each nonprofit legal services corporation is subject to this chapter and to direct regulation by the department. (V.T.I.C. Arts. 23.02 (part), 23.09 (part).)
(98) In Section 961.203, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (e), strike "Income" and substitute "Net income".
(99) In Section 961.252, Insurance Code, as added by SECTION 1 of the bill (introduced version), between "A" and "certificate", insert "benefit".
(100) In Section 961.303, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a)(2), strike "relations" and substitute "relationship".
(101) In Section 961.355, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), between "a" and "renewal application", insert "completed".
(102) In Section 961.357, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (d)(2), between "receives the" and "application", insert "completed".
(103) In Section 982.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivision (2), strike ""Alien company"" and substitute ""Alien insurance company"".
(104) In Section 982.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subdivision (3) and substitute the following:
(3) "Domestic insurance company" has, in the context of a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company, the meaning assigned by Section 841.001.
(105) In Section 982.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subdivision (4) and substitute the following:
(4) "Foreign insurance company" means an insurance company organized under the laws of another state of the United States.
(106) In Section 982.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subdivision (6) and substitute the following:
(6) "Policyholder" has, in the context of a life insurance company, accident insurance company, life and accident insurance company, health and accident insurance company, or life, health, and accident insurance company, the meaning assigned by Section 841.001.
(7) "Trusteed asset" means an asset that an authorized alien insurance company is required or permitted by this chapter to deposit with one or more trustees for the security of the company's policyholders in the United States.
(107) In Section 982.004, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the section heading, strike "ALIEN COMPANIES" and substitute "ALIEN INSURANCE COMPANIES".
(108) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 982.004, 982.051, and 982.302, strike "foreign company" in each place the phrase appears in those sections and substitute "foreign insurance company".
(109) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 982.004, 982.110, 982.111, 982.112, 982.201, 982.202, 982.203, 982.204, and 982.254, strike "alien company" in each place the phrase appears in those sections and substitute "alien insurance company".
(110) In Section 982.051, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subdivisions (1) and (2), strike "the company" in each place the phrase appears in those subdivisions and substitute "the foreign insurance company".
(111) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Section 982.052, strike "A foreign company or alien company" and substitute "Except as provided by Chapter 101 or 981, a foreign or alien insurance company".
(112) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 982.102, 982.104, 982.106, 982.107, 982.301, 982.303, 982.304, and 982.305, strike "foreign or alien company" in each place the phrase appears in those sections and substitute "foreign or alien insurance company".
(113) In Section 982.103, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ALIEN COMPANY" in the section heading and substitute "ALIEN INSURANCE COMPANY" and strike "alien company" in the other place the phrase appears in that section and substitute "alien insurance company".
(114) In Section 982.108, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ALIEN COMPANIES" in the section heading and substitute "ALIEN INSURANCE COMPANY" and strike "alien company" in the other place the phrase appears in that section and substitute "alien insurance company".
(115) In Section 982.113, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a)(2), strike "will not be hazardous" and substitute "will not create a condition that might be hazardous".
(116) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in the headings for Subchapters D and E, strike "ALIEN COMPANIES" and substitute "ALIEN INSURANCE COMPANIES".
(117) In Section 982.251, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ALIEN COMPANY" in the section heading and substitute "ALIEN INSURANCE COMPANY" and strike "alien company's" in the place the phrase appears in that section and substitute "alien insurance company's".
(118) In Section 982.252, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ALIEN COMPANY" in the section heading and substitute "ALIEN INSURANCE COMPANY" and strike "alien company" in each other place the phrase appears in that section and substitute "alien insurance company".
(119) In Chapter 982, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 982.252 and 982.253, strike "alien company's" in each place the phrase appears in those sections and substitute "alien insurance company's".
(120) In Section 982.255, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "ALIEN COMPANY" in the section heading and substitute "ALIEN INSURANCE COMPANY", strike "alien company's" in the place the phrase appears in that section and substitute "alien insurance company's", and strike "alien company" in the place the phrase appears in that section and substitute "alien insurance company".
(121) In Section 983.055, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) The insurer or health maintenance organization, under conditions approved by the commissioner and with an appropriate endorsement, may continue to use an insurance policy or evidence of coverage form that was approved before the redomestication.
(122) In Section 984.001, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Subsection (a), strike Subdivision (2) and substitute the following:
(2) authorized to write insurance policies described by Subsection (b) by those laws, the company's charter or articles of association, and a license that is in effect and that is issued by the appropriate insurance regulatory authority of the United Mexican States or any state of that nation.
(123) In Chapter 984, Insurance Code, as added by SECTION 1 of the bill (introduced version), in Sections 984.101, 984.102, 984.103, and 984.153, strike "commissioner" in each place the word appears in those sections and substitute "department".
(124) In Section 984.201, Insurance Code, as added by SECTION 1 of the bill (introduced version), strike "or renew".
(125) In Section 1101.006, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), between "years" and "during", insert "from its date of issue".
(126) In Section 1101.006, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike "incontestible" and substitute "incontestable".
(127) In Section 1101.009, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike "This section does not apply to:" and substitute "The following policies are not required to comply with this section:".
(128) In Section 1101.010, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) A term life insurance policy is not required to comply with this section.
(129) In Section 1101.054, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "life insurance policy or an endowment" and substitute "life or endowment insurance policy".
(130) In Section 1101.054, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (c), strike "insurance, endowment," and substitute "life or endowment insurance".
(131) In Section 1101.055, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b)(3), strike "commissioner under Subchapter A" and substitute "department under Article 3.42".
(132) In Section 1101.101, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "Subchapter A" and substitute "Article 3.42".
(133) In Section 1101.151, Insurance Code, as added by SECTION 2 of the bill (introduced version), between the period and "(New.)", insert: "This subchapter does not apply to a term life insurance policy."
(134) In Section 1101.153, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (c) strike "the life of a woman" and substitute "a female risk".
(135) In Section 1101.156, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "premium payments and the value of the policy is applied to the purchase of other insurance that" and substitute "premium payments, the value of the policy shall be applied to the purchase of other insurance and".
(136) In Section 1103.102, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike "and designates in writing filed with the company that issues the policy a beneficiary to receive the proceeds of the policy," and substitute ", designates in writing a beneficiary to receive the proceeds of the policy, and files the writing with the company that issues the policy,".
(137) In Section 1105.002, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) This chapter also applies to a policy issued by a company after a date specified in a written notice:
(1) that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974; and
(2) under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this chapter.
(138) In Section 1105.003, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike Subdivisions (1)-(3) and substitute the following:
(1) reinsurance;
(2) group insurance;
(3) pure endowment;
(139) In Chapter 1105, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Section 1105.004 and substitute the following:
Sec. 1105.004. REQUIRED NONFORFEITURE PROVISIONS. (a) A life insurance policy delivered or issued for delivery in this state must contain in substance the provisions prescribed by Subsections (b), (c), and (d) or corresponding provisions that:
(1) in the opinion of the department, are at least as favorable to the defaulting or surrendering policyholder; and
(2) essentially comply with Section 1105.012.
(b) A life insurance policy must provide that if there is a default in the payment of a premium the company, on proper request not later than the 60th day after the due date of the premium that is in default, will grant a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of that due date, in the amount specified by this chapter. A company may substitute for the paid-up nonforfeiture benefit required by this subsection an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits. To elect an alternative paid-up nonforfeiture benefit under this subsection, the person entitled to make the election must submit a proper request not later than the 60th day after the due date of the premium that is in default.
(c) A life insurance policy must:
(1) provide that on surrender of the policy not later than the 60th day after the due date of a premium payment that is in default the company will pay, in lieu of a paid-up nonforfeiture benefit, a cash surrender value in the amount specified by this chapter if the premiums have been paid for at least:
(A) three full years for a policy of ordinary insurance; or
(B) five full years for a policy of industrial insurance;
(2) provide that a specified paid-up nonforfeiture benefit is effective as specified by the policy unless the person entitled to make the election elects another available option not later than the 60th day after the due date of a premium payment that is in default; and
(3) provide that on surrender of the policy not later than the 30th day after any policy anniversary the company will pay a cash surrender value in the amount specified by this chapter if:
(A) the policy has become paid up by completion of all premium payments; or
(B) the policy is continued under a paid-up nonforfeiture benefit that became effective on or after:
(i) the third policy anniversary for a policy of ordinary insurance; or
(ii) the fifth policy anniversary for a policy of industrial insurance.
(d) A life insurance policy must contain:
(1) subject to Subsection (e), a statement of:
(A) the mortality table, interest rate, and method used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, if the policy:
(i) causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums; or
(ii) provides an option for changes in benefits or premiums other than a change to a new policy; or
(B) the mortality table and interest rate used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary during the first 20 policy years or the term of the policy, whichever is shorter, if the policy is a policy other than one described by Paragraph (A)(i) or (ii);
(2) a statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by the insurance laws of this state;
(3) an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy and, if a detailed statement of the method used to compute the values and benefits shown in the policy is not stated in the policy, a statement that the method of computation has been filed with the department; and
(4) a statement of the method to be used to compute the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary after the last anniversary for which those values and benefits are consecutively shown in the policy.
(e) The values and benefits described by Subsection (d)(1)(B) must be computed on the assumption that:
(1) there are no dividends or paid-up additions credited to the policy; and
(2) there is no indebtedness to the company on the policy.
(f) A provision prescribed by Subsection (b), (c), or (d) or a portion of a provision that does not apply because of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(g) A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy. (V.T.I.C. Art. 3.44a, Sec. 2.)
(140) In Section 1105.005, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "the life of a woman" and substitute "a female risk".
(141) In Section 1105.005, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (e), strike "commissioner" and substitute "department".
(142) In Section 1105.051, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) This subchapter also applies to a policy issued by a company after the date specified in a written notice:
(1) that was filed with the State Board of Insurance after August 31, 1981, but before January 1, 1989; and
(2) under which the company filing the notice elected to comply before January 1, 1989, with the law codified by this subchapter.
(143) In Section 1105.052, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (d), strike "on the date the policy is issued" and substitute "on the date of issue of the policy".
(144) In Section 1105.055, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsections (h) and (i), strike "commissioner rule" in each place the phrase appears in those subsections and substitute "rules adopted by the commissioner".
(145) In Section 1105.101, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsections (b) and (d), strike "commissioner" in each place the word appears in those subsections and substitute "department".
(146) In Section 1105.101, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (c), strike "by commissioner rule" and substitute "under rules adopted by the commissioner".
(147) In Section 1105.152, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) This section also applies to an ordinary policy issued by a company after a date specified in a written notice:
(1) that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974; and
(2) under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this section.
(148) In Section 1105.152, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (e), strike "the life of a woman" and substitute "a female risk".
(149) In Section 1105.152, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (g), strike "commissioner" and substitute "department".
(150) In Section 1105.153, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) This section also applies to an industrial policy issued by a company after a date specified in a written notice:
(1) that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974; and
(2) under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this section.
(151) In Section 1105.153, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (f), strike "commissioner" and substitute "department".
(152) In Section 1106.009, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (e).
(153) In Section 1106.010, Insurance Code, as added by SECTION 2 of the bill (introduced version), between "chapter" and the period, insert ", and the disclosure required by Section 1106.009 must be made in the form and manner prescribed by the commissioner after notice and hearing".
(154) In Section 1107.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) This chapter also applies to an annuity contract issued by a company after a date specified in a written notice:
(1) that was filed with the State Board of Insurance after August 29, 1977, but before August 29, 1979; and
(2) under which the company filing the notice elected to comply before August 29, 1979, with the law codified by this chapter.
(155) In Section 1107.002, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike Subdivisions (1) and (2) and substitute the following:
(1) a reinsurance contract;
(2) a group annuity contract that is purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, by an employee organization, or by both, other than a plan that provides individual retirement accounts or individual retirement annuities under Section 408, Internal Revenue Code of 1986, as amended;
(156) In Section 1107.004, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) Notwithstanding the requirements of Section 1107.003, an annuity contract may provide that the company has the option to terminate the contract by making a cash payment of the then present value of that portion of the paid-up annuity benefit if:
(1) no considerations are received under the contract for two years; and
(2) at maturity, payments on the portion of the paid-up annuity benefit on the plan stipulated in the contract attributable to considerations paid before that period would be less than $20 each month.
(157) In Chapter 1107, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Section 1107.053 and substitute the following:
Sec. 1107.053. CONTRACT WITH FIXED, SCHEDULED CONSIDERATIONS. (a) For an annuity contract that provides for the payment of fixed, scheduled considerations, the minimum nonforfeiture amount is computed in the same manner as the minimum nonforfeiture amount for an annuity contract with flexible considerations that are paid annually, except that:
(1) the amount of net consideration for a contract year is computed using an annual contract charge equal to the lesser of:
(A) $30; or
(B) 10 percent of the amount of the gross annual considerations paid on the contract; and
(2) the percentage of the net consideration amount for the first contract year to be used to compute the minimum nonforfeiture amount is 65 percent of the amount of net consideration for the first contract year plus 22.5 percent of the amount by which the amount of net consideration for the first contract year exceeds the lesser of:
(A) the amount of net consideration for the second contract year; or
(B) the amount of net consideration for the third contract year.
(b) The computation made under Subsection (a) must assume that the considerations are paid annually in advance. (V.T.I.C. Art. 3.44b, Sec. 2(b).)
(158) In Chapter 1107, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Section 1107.102 and substitute the following:
Sec. 1107.102. COMPUTATION OF PAID-UP ANNUITY BENEFIT UNDER CERTAIN CONTRACTS. (a) This section applies only to an annuity contract that does not provide a cash surrender benefit.
(b) Subject to Subsection (e), the present value of a paid-up annuity benefit available as a nonforfeiture option before the maturity date may not be less than the present value of the portion of the maturity value of the paid-up annuity benefit provided under the contract that arises from considerations paid on the contract before the date the contract is surrendered in exchange for or is changed to a deferred paid-up annuity.
(c) The present value of a paid-up annuity benefit under Subsection (b) shall be:
(1) computed for the period before the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations paid on the contract to determine the maturity value; and
(2) increased by any additional amount credited by the company to the contract.
(d) Subject to Subsection (e), for an annuity contract that does not provide a death benefit before annuity payments begin, the present value of a paid-up annuity benefit available as a nonforfeiture option shall be computed using the interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit.
(e) The present value of a paid-up annuity benefit may not be less than the minimum nonforfeiture amount on the date of surrender or change. (V.T.I.C. Art. 3.44b, Sec. 5.)
(159) In Section 1107.106, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "the value of the minimum nonforfeiture benefits is an amount equal to the value" and substitute "the minimum nonforfeiture benefits are equal to the sum".
(160) In Chapter 1110, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the chapter heading, strike "LIFE INSURANCE" and substitute "CERTAIN".
(161) In Section 1110.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (1)(B), strike "life insurance policy loan" and substitute "policy loan".
(162) In Section 1110.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), strike ""Life insurance policy loan"" and substitute ""Policy loan"".
(163) In Section 1110.003, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "life insurance policy loans" and substitute "policy loans".
(164) In Section 1110.004, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "must provide for" and substitute "must include a provision for".
(165) In Section 1110.004, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b)(2), strike "is adjustable" and substitute "is an adjustable maximum interest rate established from time to time by the life insurer as permitted by law".
(166) In Section 1110.004, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsections (b) and (c), strike "life insurance policy loan" in each place the phrase appears in those subsections and substitute "policy loan".
(167) In Section 1110.005, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (1), strike "rate under" and substitute "interest rate determined under".
(168) In Section 1110.007, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsections (d) and (e), strike "life insurance policy loan" in each place the phrase appears in those subsections and substitute "policy loan".
(169) In Section 1111.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (1)(B), strike "transfer" and substitute "assignment, transfer, bequest, devise, or sale".
(170) In Section 1111.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subdivisions (3) and (4) and substitute the following:
(3) "Viatical settlement" means an agreement that is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state under which a person pays anything of value that is:
(A) less than the expected death benefit of a policy insuring the life of an individual who has a catastrophic or life-threatening illness or condition; and
(B) paid in return for the policy owner's or certificate holder's assignment, transfer, bequest, devise, or sale of the death benefit under or ownership of the policy.
(171) In Section 1111.002, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), strike "transfers" and substitute "sells or otherwise transfers".
(172) In Section 1111.003, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (c), strike "transfer" in each place the word appears in that subsection and substitute "sale or purchase".
(173) In Section 1111.005, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a)(8), between "or" and "of a misdemeanor", insert "was convicted".
(174) In Chapter 1131, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the chapter heading, strike "FRANCHISE" and substitute "WHOLESALE, FRANCHISE, OR EMPLOYEE".
(175) In Chapter 1131, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Sections 1131.001, 1131.751, 1131.753, 1131.754, 1131.755, 1131.756, and 1131.757, strike "franchise" in each place the word appears in those sections and substitute "wholesale, franchise, or employee".
(176) In Section 1131.003, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "FRANCHISE" in the section heading and substitute "WHOLESALE, FRANCHISE, OR EMPLOYEE" and strike "franchise" in the other place the word appears in that section and substitute "wholesale, franchise, or employee".
(177) In Chapter 1131, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subchapter A following Section 1131.006, insert the following:
Sec. 1131.007. POLICY FORM. A policy of group life insurance is subject to Article 3.42. (New.)
(178) In Chapter 1131, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the heading for Subchapter B, strike "FRANCHISE" and substitute "WHOLESALE, FRANCHISE, OR EMPLOYEE".
(179) In Section 1131.053, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (a) and substitute the following:
(a) A group life insurance policy that insures the employers' employees or the unions' members for the benefit of persons other than the employers or unions may be issued to the trustees of a fund established by two or more employers in the same industry or by one or more labor unions, by one or more employers in the same industry and one or more labor unions, or by one or more employers and one or more labor unions whose members are in the same or related occupations or trades.
(180) In Section 1131.055, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the section heading, between "STATES" and the period, insert "GOVERNMENT".
(181) In Section 1131.065, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "FRANCHISE" in the section heading and substitute "WHOLESALE, FRANCHISE, OR EMPLOYEE" and strike "franchise" in the other place the word appears in that section and substitute "wholesale, franchise, or employee".
(182) In Section 1131.104, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), between "years" and "during", insert "from its date of issue".
(183) In Section 1131.110, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsections (b) and (c) and substitute the following:
(b) An individual must apply for an individual policy and pay the first premium to the insurer not later than the 31st day after the date the individual's employment or membership terminates.
(c) An individual policy under this section must be issued without evidence of insurability.
(184) In Section 1131.111, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b)(1), strike "before the 31st day" and substitute "not later than the 31st day".
(185) In Section 1131.203, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) An insurer may not issue a policy as to which the entire premium is to be derived from funds contributed by the insured employees.
(186) In Section 1131.205, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) An insurer may not issue a policy that provides life insurance on an employee that, together with any other life insurance under any group life insurance policies issued to the employer or to the trustees of a fund established by the employer, exceeds $250,000, except that if the employee's annual compensation from the employer or employers multiplied by seven exceeds $250,000, the group term life insurance may not exceed that computed amount.
(187) In Section 1131.304, Insurance Code, as added by SECTION 2 of the bill (introduced version), following Subsection (b), insert the following:
(c) A group policy issued before September 1, 1969, to a group described by Section 1131.054 that was in existence on that date continues in force without regard to whether the number of the employees or members insured under the policy was less than 75 percent of the employees or members eligible on that date.
(188) In Chapter 1131, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the heading for Subchapter P, strike "FRANCHISE" and substitute "WHOLESALE, FRANCHISE, OR EMPLOYEE".
(189) In Section 1131.758, Insurance Code, as added by SECTION 2 of the bill (introduced version), between "not" and "affect", insert "impair or otherwise".
(190) In Section 1131.758, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), strike "franchise life insurance" and substitute "wholesale, franchise, or employee life insurance".
(191) In Section 1131.858, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "under this section" and substitute "in accordance with this section".
(192) In Section 1132.001, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike Subdivisions (1)-(5) and substitute the following:
(1) a life insurance company;
(2) an accident insurance company;
(3) a general casualty insurance company;
(4) a mutual life insurance company;
(5) a mutual or natural premium life insurance company;
(6) a fraternal benefit society; or
(7) a local mutual aid association.
(193) In Section 1151.055, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "in effect during the lifetime of the insured for the two-year period following the date of the policy," and substitute "in force for two years from its date of issue during the lifetime of the insured,".
(194) In Section 1151.055, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), strike "exclusion from coverage for".
(195) In Chapter 1151, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Section 1151.101 and substitute the following:
Sec. 1151.101. AUTHORIZED PROVISIONS. In addition to the provisions required by Subchapter B and Section 1151.152, an industrial life insurance policy may:
(1) exclude liability or promise a benefit that is less than the full amount payable as a death benefit if the insured:
(A) dies by the insured's own hand, regardless of whether the insured is sane or insane; or
(B) dies as a result of engaging in a hazardous occupation;
(2) promise a benefit that is less than the full amount payable if the insured dies as a result of an aviation activity under a condition specified in the policy approved by the department as provided by Article 3.42;
(3) limit the maximum amount payable on the death of a child younger than 15 years of age; and
(4) include any other provision not otherwise prohibited by this chapter. (V.T.I.C. Art. 3.52, Secs. 4, 5 (part).)
(196) In Section 1152.054, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (a), strike "company, regarding a separate account," and substitute "company with respect to any separate account,".
(197) In Section 1152.057, Insurance Code, as added by SECTION 2 of the bill (introduced version), in the section heading, strike "GAINS" and substitute "INCOME, GAINS,".
(198) In Section 1152.057, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "gain" and substitute "income, gain," and strike "gains" and substitute "income, gains,".
(199) In Section 1152.058, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (3), strike "insurance company's assets" and substitute "assets of the separate accounts of an insurance company".
(200) In Section 1152.109, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "or a certificate in evidence of variable benefits issued under a" and substitute "and any certificate in evidence of variable benefits issued under that".
(201) In Section 1152.151, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "an agent" and substitute "a variable contract agent".
(202) In Section 1152.153, Insurance Code, as added by SECTION 2 of the bill (introduced version), between "is issued" and the period, insert ", unless it is suspended or revoked by the commissioner before that date".
(203) In Section 1152.201, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subdivision (2), strike "value is" and substitute "values are".
(204) In Chapter 1153, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subchapter A and substitute the following:
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1153.001. SHORT TITLE. This chapter may be cited as the Act for the Regulation of Credit Life Insurance and Credit Accident and Health Insurance. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. A(1).)
Sec. 1153.002. PURPOSE; LEGISLATIVE INTENT; CONSTRUCTION. (a) The purpose of this chapter is to promote the public welfare by regulating credit life insurance and credit accident and health insurance.
(b) This chapter is not intended to prohibit or discourage reasonable competition.
(c) This chapter shall be liberally construed. (V.T.I.C. Art. 3.53, Sec. 1.)
Sec. 1153.003. DEFINITIONS. In this chapter:
(1) "Credit accident and health insurance" means insurance to provide indemnity for payments that become due on a specific credit transaction of a debtor when the debtor is disabled, as defined in the insurance policy.
(2) "Credit life insurance" means insurance on the life of a debtor in connection with a specific credit transaction.
(3) "Credit transaction" includes the lending of money.
(4) "Creditor" means:
(A) a person who lends money or who sells or leases goods, services, property, rights, or privileges, for which the payment is arranged through a credit transaction;
(B) a successor to the right, title, or interest of a person described by Paragraph (A); or
(C) a person who is in any way associated with a person described by Paragraph (A) or (B), including a director, officer, employee, affiliate, associate, or subsidiary of the person described by Paragraph (A) or (B).
(5) "Debtor" means a person who borrows money or who purchases or leases goods, services, property, rights, or privileges, the payment for which is arranged through a credit transaction. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. B (part).)
Sec. 1153.004. APPLICABILITY OF CHAPTER. (a) This chapter applies to life insurance and accident and health insurance that is sold in connection with a credit transaction that is charged to or paid for by, in whole or part, the debtor, except insurance that is issued or sold:
(1) in connection with a credit transaction of more than 10 years' duration;
(2) in connection with a credit transaction that is:
(A) secured by a first mortgage or deed of trust; and
(B) made to:
(i) finance the purchase of commercial real property or the construction of or improvement to a building, other than a single-family dwelling, on the real property if the purchase, construction, or improvement is secured by a lien on the real property; or
(ii) refinance a credit transaction made for a purpose described by Subparagraph (i); or
(3) as an isolated transaction on the part of the insurer that is not related to an agreement or a plan for insuring debtors of the creditor.
(b) This chapter applies to insurance described by Subsection (a) regardless of the nature, kind, or plan of the credit insurance coverage or premium payment system and regardless of whether the credit insurance is charged to or paid for by the debtor directly or indirectly. (V.T.I.C. Art. 3.53, Sec. 2, Subsec. A(2).)
Sec. 1153.005. RULES. After notice and a hearing, the commissioner may adopt rules to implement this chapter. (V.T.I.C. Art. 3.53, Sec. 12 (part).)
Sec. 1153.006. FILING FEE. (a) The department shall set and collect a fee for a form or schedule filed under this chapter in an amount not to exceed $200.
(b) Fees collected under this section shall be deposited in the Texas Department of Insurance operating account. (V.T.I.C. Art. 3.53, Sec. 7, Subsec. H.)
Sec. 1153.007. GAIN OR ADVANTAGE FROM INSURANCE NOT PROHIBITED CHARGE. (a) The premium or cost of credit life insurance or credit accident and health insurance authorized under this chapter is not considered to be interest, a charge, consideration, or an amount in excess of permitted charges in connection with the underlying credit transaction.
(b) Any benefit, return, or other gain or advantage to the creditor arising out of the sale or provision of the insurance under this chapter is not a violation of any law of this state. (V.T.I.C. Art. 3.53, Sec. 9 (part).)
(205) In Chapter 1153, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Section 1153.052 and substitute the following:
Sec. 1153.052. REQUIREMENTS RELATING TO INSURANCE POLICY OR CERTIFICATE. (a) A policy or certificate of credit life insurance or credit accident and health insurance must:
(1) specify:
(A) the name and home office address of the insurer;
(B) the name of each debtor;
(C) in the case of a certificate under a group policy, the identity, by name or otherwise, of each insured;
(D) the full amount of premium or the total identifiable insurance charge, if any, to the debtor, separately for credit life insurance and credit accident and health insurance; and
(E) each exception or limitation to or restriction on the coverage;
(2) describe the coverage, including the amount and term of the coverage; and
(3) state that the benefits are to be paid to the creditor to reduce or extinguish the unpaid amount of the debt and that any amount of benefits that exceeds the unpaid debt is to be paid to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate.
(b) The requirements of this section are in addition to the other requirements of law. (V.T.I.C. Art. 3.53, Sec. 6, Subsec. B.)
(206) In Section 1153.102, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (b), strike "each revised schedule" and substitute "the revised schedules and classes of business".
(207) In Section 1153.103, Insurance Code, as added by SECTION 2 of the bill (introduced version), in Subsection (d), between "limit the amount of compensation" and "paid", insert "actually".
(208) In Section 1153.104, Insurance Code, as added by SECTION 2 of the bill (introduced version), between "action" and "taken", insert "of the commissioner".
(209) In Section 1153.702, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike "CIVIL" in the section heading and strike "for a civil penalty" in the place the phrase appears in Subsection (a) of the section and substitute "in a civil action for a penalty".
(210) In Section 1153.702, Insurance Code, as added by SECTION 2 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) The penalty provided by this section is in addition to any other penalty provided by law.
(211) In Section 1551.406, Insurance Code, as added by SECTION 3 of the bill (introduced version), in Subsection (a), between "invest" and "the money", insert "and reinvest".
(212) In Section 1578.053, Insurance Code, as added by SECTION 3 of the bill (introduced version), strike Subsection (b) and substitute the following:
(b) If the premium for the group policy is paid wholly or partly from money contributed by association members for that purpose, the policy on the date of issue must cover at least the lesser of 75 percent of the eligible members or 400 members, excluding any member whose evidence of individual insurability is not satisfactory to the insurer, who elect to make the required contributions and to be insured under the policy.
(213) In Section 1601.304, Insurance Code, as added by SECTION 3 of the bill (introduced version), between "term" and the period, insert ", subject to reelection".
(214) In Section 1625.003, Insurance Code, as added by SECTION 3 of the bill (introduced version), strike "or the governing board of an institution" and substitute "and the governing boards of institutions".
(215) In SECTIONS 1, 2, and 3 of the bill, amend the expansion clauses in each chapter as necessary to conform to changes made by this amendment.
(216) In SECTIONS 1, 2, and 3 of the bill, amend the table of contents for each chapter as necessary to conform to changes made by this amendment.
77R10092 DLF-D
Wolens
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